Vat

[Pauldohert]

I was under the impression that the tax man wnated VAT worked out on the invoice total for all lines for a particular VAT code.

So 2 lines at 5 = ie 10 pound total = 1.75 VAT

If you do it line by line you get


£5.00 = 88p VAT
£5.00 = 88p VAT

So invoice would have total of 10.00 and 1.76 VAT.

-So the two methods give differnat VAT amounts - and in this example the customer in my experiance wants to pay 1.75 VAT - cos they just do the calc at the end?


Does anyone have a link to which is the correct method - or any advice?

Should the lines be right - or the invoice?

 

[namliam]

In holland we recently had a court case that where the courts ruled that VAT is to be calculated by item not by invoice.

I have no clue however if this holds true for the UK or even what the VAT rates are.

 

[Rabbie]

I was under the impression that the tax man wnated VAT worked out on the invoice total for all lines for a particular VAT code.

So 2 lines at 5 = ie 10 pound total = 1.75 VAT

If you do it line by line you get


£5.00 = 88p VAT
£5.00 = 88p VAT

So invoice would have total of 10.00 and 1.76 VAT.

-So the two methods give differnat VAT amounts - and in this example the customer in my experiance wants to pay 1.75 VAT - cos they just do the calc at the end?


Does anyone have a link to which is the correct method - or any advice?

Should the lines be right - or the invoice?

As already stated you can use either. HM Revenue & Customs don't mind. The important thing is when you are reclaiming the VAT on purchases you use the VAT amount specified on the invoice and don't work it out.

Neileq has posted a good explanation from an accounting point of view

 

[raskew]

Hi -

It appears to be 17.5% on most items, but 0% on some. Take a look at this thread: http://www.access-programmers.co.uk/forums/showthread.php?t=135964

Bob

 

[Ron_dK]

I thought a sort of formal invoice including VAT should look something like this :

http://www.clickcartpro.co.uk/media/gbu0/html/printable-invoice-l.gif

 

[neileg]

The difference is never going to be more than a penny or two. HMRC don't care whether you do it by line or by invoice total.

 

[Rabbie]

Hi -

It appears to be 17.5% on most items, but 0% on some. Take a look at this thread: http://www.access-programmers.co.uk/forums/showthread.php?t=135964

Bob

The standard rate of VAT in the UK is 17.5%. There are some items like Heating Oil that has a VAT rate of 5%. There are also other items that are either Zero-rated or VAT exempt. The last two categories are identical for practical purposes but have a different legal basis.

 

[namliam]

The difference is never going to be more than a penny or two.

Here in holland one of our grocery shops (Albert Heijn) was taken to court and lost because they were using these methods to their (and granted, the customers advantage). A few cents over 100 miljoen transactions adds up.

Like I posted earlier, the tax office won and the more favorable way was deamed illegal. Guess the judge wasnt a consumer?

 

[neileg]

The standard rate of VAT in the UK is 17.5%. There are some items like Heating Oil that has a VAT rate of 5%. There are also other items that are either Zero-rated or VAT exempt. The last two categories are identical for practical purposes but have a different legal basis.

And some items are outside of the scope of VAT!

The distinction between zero rated and exempt matters more for the seller than it does for the buyer, since it affects the ability to reclaim input tax.

 

[Pauldohert]

Since bothe the lines and total can't be necessarily correct.

What to accounts systems expect - the lines or the totals to be right or don't they check?

 

[Rabbie]

Since bothe the lines and total can't be necessarily correct.

What to accounts systems expect - the lines or the totals to be right or don't they check?

Both are valid ways of calculating the VAT due on an Invoice as Neileq has confirmed.

When you are reclaiming VAT you use the VAT shown on the Invoice depending on how it was calculated. If the VAT has been calculated incorrectly you still use the VAT on the invoice.

 

[Pauldohert]

Sorry what I mean was - when you transfer invoice details to an accounts system

does it want the line VAT correct - or the invoices VATS correct - or does it check neither. Since both lines and invoice can't be necessarily correct?

Does it just check that either is right? What happens when you start spreading this across nominal codes etc

 

[neileg]

There can be a conflict if the customer's accounting system expects VAT on a line basis and the supplier's invoice is done on a total basis, or vice versa. It's important, therefore that the system you develop gives the user the ability to alter the VAT so that the rounding differences are adjusted out.

When it comes to nominal analysis, the VAT is excluded. All the VAT is posted to the VAT account. Even accountants (me included) don't get hung up on the odd penny.

 

[Rabbie]

Sorry what I mean was - when you transfer invoice details to an accounts system

does it want the line VAT correct - or the invoices VATS correct - or does it check neither. Since both lines and invoice can't be necessarily correct?

Does it just check that either is right? What happens when you start spreading this across nominal codes etc

That would depend on the design of your Accounts System. If you are just storing Invoice details there then I would store the Total Net and the the Total VAT. Its the actual total VAT on the Invoice regardless of how its calculated that you use to calculate how much you send to HMRC each accounting period. The actual payment is calculated by subtracting the total VAT on allowable acquistions from the total VAT you have invoiced for.