How much is my product plus vat?

WHARTY · #1 25th September 2010, 18:49

Ok bit of a thick question i think.

I never used to be VAT registered but now that i am i have to obviously charge VAT.

My product sells for £4 inc VAT. I assumed that the VAT on the product is 17.5% of £4.00. I worked this out at 70p. I assumed my product was then £3.30+VAT ? but when i do the calculation backwards thinking that 17.5% of £3.30 is £4 i get something like 57p? which is 13p short?

Can somebody give me a calculation that i can use to get this right?

Thanks

Lee

Stretchy · #2 25th September 2010, 18:50

£3.40 ex vat.

Divide inc vat by 1.175

WHARTY · #3 25th September 2010, 18:54

Quote:

Originally Posted by Stretchy

£3.40 ex vat.

Divide inc vat by 1.175

Wher does the 1.175 come from

Stretchy · #4 25th September 2010, 18:56

Quote:

Originally Posted by WHARTY

Wher does the 1.175 come from

If you have the ex vat, you times by 1.175 to add the vat.

Simple maths tells you that if you want to reverse the calculation you just divide rather than times.

Where you were going wrong was working out 17.5% of £4. The percentage is calculated on the ex vat not inc vat figure.

Trust me, i'm damn clever.

MBS Accountants · #5 25th September 2010, 19:06

Quote:

Originally Posted by WHARTY

Wher does the 1.175 come from

You take your normal price (100%) and add 17.5% VAT. This gives you your price including VAT (117.5%).

To work backwards from your VAT inclusive price of £4 (117.5%) you need to divide by 117.5 and multiply by 100 (or divide by 1.175 as pointed out)

This gives you a excluding VAT price of £3.40 and VAT of 60p.

Hope this helps in explaining it?

David Griffiths · #6 25th September 2010, 19:07

HMRC refer to the VAT fraction when working out the amount of VAT included in a gross figure. At a rate of 17.5% the VAT fraction is 3/23 - that comes from 17.5 / (100 + 17.5) cancelled down.

When VAT hits 20% in the new year the VAT fraction will be 1/6 (20 / (100 + 20)

WHARTY · #7 25th September 2010, 19:12

Ok i am still confused. I admit i am crap at maths.

I need the actual calculation written in front of me without being told the answer or reading between the lines. I still don't know where the £3.40 came from. Before i went VAT registered my product was £4 so it would be easy if it was plus vat, but working out the inc VAT knowing the final selling price (£4) is what i can't get my head round.

Please teach me to suck eggs

and write me the calculation.

WHARTY · #8 25th September 2010, 19:14

Cheers wrote that last reply while you guys were replying!

Thanks very much.

Stretchy · #9 25th September 2010, 19:15

Quote:

Originally Posted by WHARTY

Ok i am still confused. I admit i am crap at maths.

I need the actual calculation written in front of me without being told the answer or reading between the lines. I still don't know where the £3.40 came from. Before i went VAT registered my product was £4 so it would be easy if it was plus vat, but working out the inc VAT knowing the final selling price (£4) is what i can't get my head round.

Please teach me to suck eggs

and write me the calculation.

The £4 is 117.5 % of the ex vat amount. Does that make sense?

Just saw your post above, glad you got it sorted.

wizzard · #10 25th September 2010, 19:21

Quote:

Originally Posted by David Griffiths

HMRC refer to the VAT fraction when working out the amount of VAT included in a gross figure. At a rate of 17.5% the VAT fraction is 3/23 - that comes from 17.5 / (100 + 17.5) cancelled down.

When VAT hits 20% in the new year the VAT fraction will be 1/6 (20 / (100 + 20)

No 15% is 3/23, 17.5% is 7/47.