REVERSE CALCULATE VAT? mathematical nightmare

[JNM21]

Hi everyone, if you have been charged say £33 vat and don't have the gross figure how can you calculate the to find the gross figure?

 

[Bushman]

If it's 20% VAT then just multiply it by 6 (£33 x 6 = £198)

 

[Newchodge]

If it's 20% VAT then just multiply it by 6 (£33 x 6 = £198)

Then to check - 198-33=165
165+20%Vat = 198

 

[JNM21]

t

Then to check - 198-33=165
165+20%Vat = 198

Hi thanks for your reply. The actual figure is 1025.68 VAT we have paid. Ive just made your calculation but its not exact????

 

[fisicx]

How inexact is it? A few pennies?

Try this:

If the VAT is 20% of the original price then £1025.68 x 5 will give you the original price. If this is wrong then the VAT wasn’t 20% or someone can’t do maths.

 

[Newchodge]

I make the VAT free cost of that 5116.40

 

[JNM21]

I make the VAT free cost of that 5116.40

thank you for your help but thats wrong... £5116.40 + 20% VAT =£1023.28 VAT with a gross figure of £6139.68

the figure we have paid in vat is £1025.68

 

[JNM21]

How inexact is it? A few pennies?

Try this:

If the VAT is 20% of the original price then £1025.68 x 5 will give you the original price. If this is wrong then the VAT wasn’t 20% or someone can’t do maths.

looks like your right, thank you!

 

[fisicx]

The price without VAT is £5128.40 (£1025.68 x 5)

 

[The Byre]

thank you for your help but thats wrong... £5116.40 + 20% VAT =£1023.28 VAT with a gross figure of £6139.68

the figure we have paid in vat is £1025.68

So what??? Six times £1025.68 is still £6154.08.

The one great mystery about VAT for me, is why so many people find multiplying and dividing by five or six so very difficult! What is it about the very, very simple principles of VAT that some people find hard to grasp?

 

[JNM21]

So what??? Six times £1025.68 is still £6154.08.

The one great mystery about VAT for me, is why so many people find multiplying and dividing by five or six so very difficult! What is it about the very, very simple principles of VAT that some people find hard to grasp?

Im a complete novice sorry. Im double;e checking other peoples work on this one. but thanks you for your assistance

 

[The Byre]

Assuming that you have not yet paid this bill, I suggest you send it back, telling the vendor or service provider that the figures just do not add up and that they need to send an invoice that makes sense!

 

[estwig]

http://www.vatcalculator.co.uk/

 

[TheCyclingProgrammer]

http://www.vatcalculator.co.uk/

All you need is a regular calculator. Multiply VAT by 5 for net price or 6 for the gross. It’s that simple!

 

[Raw Rob]

If there are multiple lines on the invoice, there are two ways to calculate the VAT which might end up with different results due to rounding errors. You can either calculate the VAT on each line, or you can add every line up and calculate the VAT on the total. If there are several hundred lines on the invoice, you could conceivably have a difference of a couple of pounds by using the other method.

 

[Chris Ashdown]

Divide the total by 100 plus the vat rate at present this would give 120
so total money divided by 120 gives one percent then multiply by either vat rate 20% or 80% for ex vat

 

[TheCyclingProgrammer]

Divide the total by 100 plus the vat rate at present this would give 120
so total money divided by 120 gives one percent then multiply by either vat rate 20% or 80% for ex vat

You're just going to confuse OP and this is wrong anyway. If you know what 1% of the net is, you would multiply by 20 (not 20%) to get the VAT and multiply by 100 to get the net cost. But you don't need to these mental gymnastics at all - all you ever need is basic multiplication or division.

All you ever need to remember, assuming standard rated VAT at 20%:

* If you know the value of the VAT: gross cost = (VAT * 6), net cost = (VAT * 5)
* If you know the net cost: VAT = (net * 0.2), gross cost = (net * 1.2)
* If you know the gross cost: VAT = (gross / 6), net cost = (gross / 1.2)

 

[The Byre]

You're just going to confuse OP and this is wrong anyway.

Quite!

First you need to find out what the blue number is and multiply that by five and then divide by six. This gives you your factor for ten. If the blue number is less than eight, but more than two, you should move five places to the right. If however the blue number is more than eight, you need to look up the primary factor on the green scale provided by HMRC. These factors are listed on page 94 of the PE circular issued to VAT registered companies.

If you are not a VAT registered company, there is an on-line help number available where you can hear a recording of what the current rules are for numbers over eight.

If you have not yet been issued a blue number, you can fill in the on-line form V-252 and HMRC will send you a series of blue number options. These should be combined with your company's registered green number according to the standing orders on the reverse side of your green scale booklet.

Once the above procedures have been completed, the person standing closest to the fireplace is Saint Francis of Assisi.

 

[DontAsk]

All you ever need to remember, assuming standard rated VAT at 20%:

And when the VAT rate changes? Far better to explain where the factors of 5, 6. 0.2, 1.2, etc come from. Give a man a fishing rod...

 

[paulears]

VAT, or rather percentages is misunderstood by so many people. Try asking for a VAT receipt in Tesco, they simply deduct 20% on a calculator, and when you ask them to add 20% to the figure they got, it comes back with a different price. Trying to explain their calculation is wrong brings tear to your eyes as you wait and wait for supervisor, assistant manager, then the manager who then calls somebody in accounts who understands how it works. Ask somebody to add 20% VAT to £100, and they all come up with £120. Ask them to then take it off again and they are stumped. Maybe insisting young people stay in education until they pass GCSE maths is a good move!

 

[perfumeryart]

All you need is a regular calculator. Multiply VAT by 5 for net price or 6 for the gross. It’s that simple!

Interesting to see that the 20% VAT was supposed to be temporary for 13 months and go back to 17.5% in January 2010

 

[Raw Rob]

Interesting to see that the 20% VAT was supposed to be temporary for 13 months and go back to 17.5% in January 2010

No. The 15% was temporary and went back to 17.5% in Jan 2010. Then it went to 20% in Jan 2011. https://en.wikipedia.org/wiki/Value-added_tax_in_the_United_Kingdom#Historical_rates

 

[ffox]

Divide the total by 100 plus the vat rate at present this would give 120
so total money divided by 120 gives one percent then multiply by either vat rate 20% or 80% for ex vat

This is absolutely the correct way. It will always be correct regardless of the percentage rate used. Using divisors learned by rote for a particular % rate means relearning whenever a different % rate is used.

 

[Chris Ashdown]

Yup I accept I mistakenly put % signs on rather than just multiply by 20 or 80. (note the 80 is the price before vat was added, which is what he wanted)

 

[ffox]

You can either calculate the VAT on each line, or you can add every line up and calculate the VAT on the total.

You should always calculate VAT (or Tax) for each line, as you may well have different rates on different lines of the same invoice. For audit control you should also store each line with its own VAT calculation as this way you can recreate an invoice accurately and each line calculation retains its integrity when tax rates change at a later date.

Incidentally, calculations performed up thread for the OP all assume that VAT has been applied at a uniform rate of 20% across the whole invoice. This may not be the case.

 

[Alan]

You should always calculate VAT (or Tax) for each line, as you may well have different rates on different lines of the same invoice.

If isn't mandatory to calculate per line - VAT 700 17.5.1 give you the option, if you so choose, to invoice per line.

 

[Newchodge]

This is absolutely the correct way. It will always be correct regardless of the percentage rate used. Using divisors learned by rote for a particular % rate means relearning whenever a different % rate is used.

NO IT WON'T

Price including Vat is divided by 120. Correct.

Result multiplied by 20 is correct to get Vat amount.
Result multiplied by 100 gives net amount excluding VAT.

If you multiply the result by 80 you end up with an unallocated amount.

 

[ffox]

If isn't mandatory to calculate per line - VAT 700 17.5.1 give you the option, if you so choose, to invoice per line.

Indeed it does. but if you have multiple rates of tax on a single invoice you can't do it that way.

NO IT WON'T

Price including Vat is divided by 120. Correct.

Result multiplied by 20 is correct to get Vat amount.
Result multiplied by 100 gives net amount excluding VAT.

If you multiply the result by 80 you end up with an unallocated amount.

Absolutely, thanks for the correction. However, you should still calculate the amount of 1% and then multiply up from there.

 

[TheCyclingProgrammer]

Yup I accept I mistakenly put % signs on rather than just multiply by 20 or 80. (note the 80 is the price before vat was added, which is what he wanted)

You’re still wrong. If you divide the gross amount by 120 you multiply by 100 to get the net, not 80.

It’s still simpler to just divide by 1.2.

 

[The Byre]

I cannot believe that grown adults on a business forum of all places, are discussing how to calculate simple percentages!

 

[ffox]

I cannot believe that grown adults on a business forum of all places, are discussing how to calculate simple percentages!

It's not about simple percentages. It's about business process.

It’s still simpler to just divide by 1.2.

Change the rate to 17.5% and that divisor becomes 1.175. While 1.2 may be easy mental arithmetic to a person who is mentally numerically agile, 1.175 will stump 40% - 60% of regular office workers, unless they pull the calculator out of the desk drawer.
That's not so bad - except it takes longer to do.

Similarly dividing gross by 6 to get 20% is okay when the rate is 20%, but the divisor becomes 6.7142 when the rate is changes to 17.5%.

That's all okay when it is one person working the sum and that person is reasonably numerically agile. It's a different matter when it's creating an algorithm for a business, or training staff in a method.

Where algorithms are concerned a change in VAT rate can mean working through huge numbers of spreadsheet templates and other programmes to correct the divisor if the 'divide by' method is used.

Where staff are concerned management must ensure that each and every individual knows the new division number, and must audit result where it is used to make sure no-one forgets.

Use the basic divide net by 100 and multiply the result by the rate (number not percentage) means that all any one need to remember is the number of the VAT rate (20, or 17.5, or 10, or 5)

With algorithms there must be a single network source for current VAT rates that is controlled by management.

Incorrectly calculated VAT is a huge problem and can cost a business very large amounts of dosh. It's worth taking a serious look at methods used in order to control risk.

 

[TheCyclingProgrammer]

That's all well and good but we're not talking about algorithms or business processes, we are talking about one person - the OP - needing to quickly calculate something. You're over-analysing the problem and over-engineering the solution. And I was assuming OP would be using a calculator anyway.

 

[ffox]

one person - the OP - needing to quickly calculate something.

Then the simple answer would be -
"...assuming that VAT has been charged at 20%. Divide the VAT amount by 20 and multiply the result by 100 for NET and 120 (NET + VAT Rate) for GROSS..."

Indeed, introducing divisors of 5 and 6 and 1.2 are over engineering and confusing.

Always reduce the answer to the simplest terms. The simple answer is usually the best.

 

[TheCyclingProgrammer]

What a strange world you live in where whipping out a calculator and doing VAT * 6 is not the simple answer.

 

[ffox]

What a strange world you live in where whipping out a calculator and doing VAT * 6 is not the simple answer.

It's only simple for those who appreciate what the *6 represents. It assumes that the OP has innate knowledge that there is a relationship between 100, 120, 20 and 6. If that's not there then it's just the blind following the blind -
"Oh, you divide by 6".
"Why"
"Er, because somebody told me to."

BTW - I don't own a calculator.

 

[TheCyclingProgrammer]

BTW - I don't own a calculator.

If you own a computer, you own a calculator. You don't even need to open the native calendar app, you can just use Google.

This "innate knowledge" you refer to - you're talking about basic mathematics. If somebody lacks the basic maths skills to understand why multiplying 20% VAT by 5 to reach the net cost or 6 to reach the gross works, then I can't really help that. This is a business forum and if you're struggling with this level of basic maths and trying to run a business then I'd politely suggest brushing up a bit.

 

[ffox]

This "innate knowledge" you refer to - you're talking about basic mathematics. If somebody lacks the basic maths skills to understand why multiplying 20% VAT by 5 to reach the net cost or 6 to reach the gross works, then I can't really help that. This is a business forum and if you're struggling with this level of basic maths and trying to run a business then I'd politely suggest brushing up a bit.

But, the OP apparently didn't know this. It's easy for me (or you) too assume that others have a basic understanding of maths. It's also risky.

Numeracy (or lack it) isn't always related to intelligence or learning, it's often related to the way an individual mind joins the dots.

My business has always involved finding solutions that will perform in use for any individual, regardless of intelligence, knowledge or aptitude.

Rule number one is - never assume

 

[The Byre]

Numeracy (or lack it) isn't always related to intelligence or learning, it's often related to the way an individual mind joins the dots.

Be that as it may, running a business is ALL about calculating. If you can't calculate, you can't run a business.

 

[estwig]

If you own a computer, you own a calculator. You don't even need to open the native calendar app, you can just use Google.

This "innate knowledge" you refer to - you're talking about basic mathematics. If somebody lacks the basic maths skills to understand why multiplying 20% VAT by 5 to reach the net cost or 6 to reach the gross works, then I can't really help that. This is a business forum and if you're struggling with this level of basic maths and trying to run a business then I'd politely suggest brushing up a bit.

There are people and apps for this, as a business owner I'm not remotely interested, and don't care about multiplying anything by anything else.

 

[Newchodge]

But, the OP apparently didn't know this. It's easy for me (or you) too assume that others have a basic understanding of maths. It's also risky.

Given the thread title it is also fairly obvious!