How does VAT at Poundland work?

estebanrey

estebanrey

estebanrey

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By my calculations, if a shop sells a VAT applicable item for £1, then it's price without VAT is 83.3333333333333p.

Conversely, if they set a price of 83p before VAT then it becomes 99.6p.

So my question is, what happens to that third of a penny? Is VAT rounded up and taken by HMRC or do the shop get to keep it?
 
estebanrey said:
By my calculations, if a shop sells a VAT applicable item for £1, then it's price without VAT is 83.3333333333333p.

Conversely, if they set a price of 83p before VAT then it becomes 99.6p.

So my question is, what happens to that third of a penny? Is VAT rounded up and taken by HMRC or do the shop get to keep it?
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At 99.6p then every five items will round off nicely. It shouldn't ever be more than 0.5p out in total.
 
The price would just be 83.33p before VAT surely? No problem having pre-VAT prices in decimals I don't think
 
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They will probably just pay 17p of vat on each £1 of standard rated sales. They "lose" the 0.3333p each time.

HMRC guidance is to round to the nearest penny on a transaction by transaction basis. But you can propose doing it differently, if the result is a fair one (Poundland could decide to do it on a 16.66666667p per £1 basis, if their system can cope)
 
They add the decimals up over lots of sold items it ends up counting up to full numbers. hmrc will also take your house away for a few unpaid pence, i think. Maybe not decimals but i can't say for sure. They would probably fine you if you didn't pay the decimals.
 
so what about the 99p shop, how do they work it..............
we need a definitive white paper on ***** store VAT calculations TBH
 
They don't pay vat on each individual item at the time of purchase - they'll pay vat at the end of the month or year - so £100,000 of VAT'able sales at the end of the month will generate a £20,000 (or whatever the rate is for the vat'able items) vat bill to be paid to HMRC.

Or do you think that every time you buy someting for a quid it wires 17p straight to HMRC? Lol.
 
amigafan2003 said:
They don't pay vat on each individual item at the time of purchase - they'll pay vat at the end of the month or year - so £100,000 of VAT'able sales at the end of the month will generate a £20,000 (or whatever the rate is for the vat'able items) vat bill to be paid to HMRC.

Or do you think that every time you buy someting for a quid it wires 17p straight to HMRC? Lol.
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Well, no. But every time they make a £1 sale, the system has to record something. Either it records as 17p of VAT, or it records 16.66666667p. Either way, the VAT calculation will be a summary of all these individual transactions.

What they certainly don't do is total up all their sales and divide by 6 to get the VAT to pay.
 
cheesyboy said:
Well, no. But every time they make a £1 sale, the system has to record something. Either it records as 17p of VAT, or it records 16.66666667p. Either way, the VAT calculation will be a summary of all these individual transactions.

What they certainly don't do is total up all their sales and divide by 6 to get the VAT to pay.
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You seem awfully sure for someone who doesn't know how VAT is paid?
 
Going off on a tangent (surprising for GD I know...) there's a bloke near me who runs a 'burger van' type business, he parks up in a layby early morning, gets loads of trade, tea,coffee, bacon rolls etc and finishes around 1.30pm. Its all cash from passing truck drivers/motorists, surely this type of business must be perfect for fiddling the taxman?

My next thread: 'How to start a burger van business...'
 
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