How does VAT at Poundland work?

cheesyboy · 14 Jan 2015 at 12:45

Tuppy_Glossop said:
You're right. Because that wouldn't be 20%

In your world, maybe

£1 / 6 = 16.67p
£1 - £0.1667 = £0.833
£0.1667 / £0.833 = 20%

estebanrey · 14 Jan 2015 at 12:49

cheesyboy said:
In your world, maybe

£1 / 6 = 16.67p
£1 - £0.1667 = £0.833
£0.1667 / £0.833 = 20%

Personally I divide by 1.2 (as it's simply reversing the calculation for adding 20% on) which gives the same result of course.

But can't figure out the 'logic' of diving by 6 for working out 20% (what am I missing?) even though I can see it yields the same end result.

cheesyboy · 14 Jan 2015 at 12:54

estebanrey said:
Personally I divide by 1.2 (as it's simply reversing the calculation for adding 20% on) which gives the same result of course.

But can't figure out the 'logic' of diving by 6 for working out 20% (what am I missing?) even though I can see it yields the same end result.

Gross is 120%
VAT is 20%

120/20 = 6

It's quicker than using 1.2, as you press fewer buttons on your abacus

(and 1.2 is ok for working out net, but if you want vat, you would need an extra step)

In the 17.5% days, you had 7/47ths, which was crap

Tuppy_Glossop · 14 Jan 2015 at 12:58

Of the full, vat-inclusive, sale price, obvs

Half a brain and I don't even use it :eek:

estebanrey · 14 Jan 2015 at 12:58

cheesyboy said:
Gross is 120%
VAT is 20%

120/20 = 6

It's quicker than using 1.2, as you press fewer buttons on your abacus

In the 17.5% days, you had 7/47ths, which was crap

Ahh yes, makes sense.

Whether it's quicker depends on the question I guess....

How much of a £100 sale is VAT = divide by 6 (£16.67)
What is the price of a £100 item without VAT = divide by 1.2 (£83.33)

eatcustard · 14 Jan 2015 at 13:01

Not every item Poundland sell is vatable

cheesyboy · 14 Jan 2015 at 13:02

estebanrey said:
Ahh yes, makes sense.

Whether it's quicker depends on the question I guess....

How much of a £100 sale is VAT = divide by 6 (£16.67)
What is the price of a £100 item without VAT = divide by 1.2 (£83.33)

100 / 6 * 5 = 83.33

Same number of buttons there too: it's a winner.

This is a secret technique, mind. I've just saved potentially days of your life, if you're in the trade.

Haggisman · 14 Jan 2015 at 13:08

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.

Most likely what the system will record is the sale value and the VAT rating.

E.g. sale £1, VAT Rating 20%

At the end of the day/week/month/financial year/whatever, they'll calculate the total of of all items with the same VAT rating and work out the amount of VAT to be paid.

So 120,000 items sold for £1 with a VAT rating of 20% = £20,000

D.P. · 14 Jan 2015 at 13:21

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.

Or it can record that 10000 items were sold at £1 that have a 20% VAT, therefore £20,000 of VAT is due to HMRC.

estebanrey · 14 Jan 2015 at 13:29

D.P. said:
Or it can record that 10000 items were sold at £1 that have a 20% VAT, therefore £20,000 of VAT is due to HMRC.

Wrong, £1,666.6666666666666p of VAT is due with your numbers (leaving the same problem).

100-20% is not equal to 80+20%

ADT · 14 Jan 2015 at 13:33

1st world problems. Regret reading this thread now, my head hurts

Pudney · 14 Jan 2015 at 13:37

Haggisman said:
Most likely what the system will record is the sale value and the VAT rating.

E.g. sale £1, VAT Rating 20%

At the end of the day/week/month/financial year/whatever, they'll calculate the total of of all items with the same VAT rating and work out the amount of VAT to be paid.

So 120,000 items sold for £1 with a VAT rating of 20% = £20,000

D.P. said:
Or it can record that 10000 items were sold at £1 that have a 20% VAT, therefore £20,000 of VAT is due to HMRC.

I'm interested how you think this would work bearing in mind the need for them to be able to issue a VAT invoice for each transaction?

Just to be clear, the systems should be able to work out the net and gross amount on a per item basis, not for a "months" (or other time unit) worth of sales.

POB · 14 Jan 2015 at 13:39

Also I doubt most people buy just one item.

Pudney · 14 Jan 2015 at 13:47

POB said:
Also I doubt most people buy just one item.

But systems will be designed with the price of one item to allow the flexibility of any multiples of that item.

Actually, how it normally works is that you record the net price of one item, the rates of VAT with some form of code then assign a VAT code to the each net item. Then if VAT rates change the system can easily be updated.

Haggisman · 14 Jan 2015 at 13:47

Pudney said:
I'm interested how you think this would work bearing in mind the need for them to be able to issue a VAT invoice for each transaction?

Just to be clear, the systems should be able to work out the net and gross amount on a per item basis, not for a "months" (or other time unit) worth of sales.

https://www.gov.uk/government/publi...#vat-invoices-particular-situations-and-rules

Pudney · 14 Jan 2015 at 13:52

Haggisman said:
https://www.gov.uk/government/publi...#vat-invoices-particular-situations-and-rules

What are you referring to?

Haggisman · 14 Jan 2015 at 13:55

Pudney said:
What are you referring to?

Doh, section 17.5.

Edit: and https://www.gov.uk/vat-retail-schemes/point-of-sale-scheme

"Who can use it
You can use this scheme if you can identify the VAT rate for goods sold at the time of sale, eg you have an electronic till that does this for you.

How to calculate your VAT
Add up all the sales for each VAT rate for the VAT return period.
For 20% rated goods, divide the sales by 6. For 5% rated goods, divide the sales by 21."

Looks like my first post was spot on

SciNeT · 14 Jan 2015 at 13:59

D.P. said:
Or it can record that 10000 items were sold at £1 that have a 20% VAT, therefore £20,000 of VAT is due to HMRC.

Isn't that £2000? 10,000 items @ £1 is only £10,000.

Pudney · 14 Jan 2015 at 14:01

Haggisman said:
Doh, section 17.5.

Edit: and https://www.gov.uk/vat-retail-schemes/point-of-sale-scheme

"Who can use it
You can use this scheme if you can identify the VAT rate for goods sold at the time of sale, eg you have an electronic till that does this for you.

How to calculate your VAT
Add up all the sales for each VAT rate for the VAT return period.
For 20% rated goods, divide the sales by 6. For 5% rated goods, divide the sales by 21."

Looks like my first post was spot on

17.5 Calculation of VAT on invoices – rounding of amounts

A record of all sales must be kept, this includes the VAT invoice for each transaction. A VAT invoice must include the VAT exclusive amount as well as the VAT amount.

To clarify before we continue, what is your experience in this area?

Haggisman · 14 Jan 2015 at 14:06

Pudney said:
A record of all sales must be kept, this includes the VAT invoice for each transaction. A VAT invoice must include the VAT exclusive amount as well as the VAT amount.

To clarify before we continue, what is your experience in this area?

Which is addressed in the link I posted previously:

"17.5.2 Calculation based on tax per unit or per article
If you want to work out the VAT per unit or per article (for example, for use in price lists), you must work out the amounts in one of the following ways:

4 digits after the decimal point and then round to 3 digits - for example, if the VAT is £0.0024, it should be rounded to £0.002 (0.2p)
the nearest 1p or 0.5p - if you decide to do this, you must not round the VAT down to ‘nil’ on any unit or article that is liable at the standard or reduced rate, for example, if the VAT is £0.0024 it should be rounded to £0.005 (0.5p)"

No experience - what's yours?