Calculating VAT

Izi · 3 Dec 2010 at 14:50

What is the correct way to do this.

Say I have an item priced £10 EX vat, £11.75inc VAT.

If I bought a 1000 of these, should it be 1000 * 10 + 17.5% or £11.75*1000?

shine · 3 Dec 2010 at 14:52

Both will get you the same answer.

AJK · 3 Dec 2010 at 14:59

Mathematically, a*b*c = (a*b)*c = a*(b*c)

So,

(Quantity x Price) x VAT rate = Quantity x (Price x VAT rate)

Izi · 3 Dec 2010 at 15:03

OK take Product £3.39 ex, 3.98 inc.

3.39 * 1000 = £3390 + vat = £3983.25
3.98 * 1000 = £3980

Which is correct?

AJK · 3 Dec 2010 at 15:10

You've rounded off part way through. When you add VAT to £3.39, you get £3.98325 NOT exactly £3.98. If you are working from pre-rounded figures like that, you should probably just do Inclusive Price x Quantity.

Izi · 3 Dec 2010 at 15:11

AJK said:
You've rounded off part way through. £3.39 excluding is NOT £3.98 including, it's £3.98325. If you already have pre-rounded inc VAT figures, you'll have to take the £3.98 * 1000 price.

ahhhhh, gotcha.

maths, as you can tell is not my strong point.

AJK · 3 Dec 2010 at 15:14

VAT calculations can be a right pain sometimes. I've had to fix a system which calculated shipping costs, membership discounts and VAT rebates for certain types of customer, all at once from the subtotal figure. That got my head spinning, trying to figure out why it wasn't calculating in the correct order :-/