Shipping Tax

My selling prices are displayed to include 20% tax, which should also be the case for shipping costs. However, if I check the ‘shipping’ option in the ‘standard tax rates’ setting, it adds 20% to the listed shipping rate instead of separating 20% from it like with the product. As an example:
Product is ￡21.60
Shipping is ￡3.50
At checkout, product is shown as ￡21.60 (including ￡3.60 tax) and shipping is shown as ￡4.20 including ￡0.70 tax. What I need is shipping to be shown as ￡3.50 (including ￡0.58 tax), can this be done? It was previously running fine but I’ve recently had a new theme installed which has messed with some settings.
Thanks in advance
Cam