VAT - round up or down

[Elemy]

Ok, really basic questions to ask. So basic I am almost embarrassed.

Should you round VAT up or down to the nearest penny? It's always bothered me, and I know our customers aren't going to care since they are claiming it back, but I don't want to look like we are trying to con people!!

And am I right in thinking that VAT is charged on each product separately and then added at the end, or is it charged on the total? If it is charged on each product and then totalled at the end, then the result is sometimes quite different to had I worked out the VAT on the total.

But on the other hand, if different products are VAT rated differently, or zero rated, then it makes sense to charge VAT separately on each product and also declare the VAT rating. (Which is what we are doing at the moment). Is this right? Sometimes the invoices get terribly complicated.

Sorry if this doesn't make sense or if I have explained myself badly!!!

 

[johndon68]

And am I right in thinking that VAT is charged on each product separately and then added at the end, or is it charged on the total? If it is charged on each product and then totalled at the end, then the result is sometimes quite different to had I worked out the VAT on the total.

Either way is acceptible to HMRC. For example, Sage 50 Accounts does it on a line by line basis, Sage 200 Accounts does it on the total.

John

 

[Elemy]

Thanks John. Should you do it line by line if your products have different VAT ratings? Otherwise the VAT total might make no sense to the customer if they are expecting it to be 17.5% of the final price?

Also, should you round up or down to the nearest penny?

Thanks

 

[johndon68]

If you are mixing vatable and non vatable items, I'd do it line by line. As for the roundings, if the value is half a pence or greater, round up to the nearest penny otherwise round down.

John

 

[Elemy]

Thanks for clearing that up!

 

[KM-Tiger]

Also, should you round up or down to the nearest penny?

Rounding rules here.

 

[heliocentric]

Either way is acceptible to HMRC. For example, Sage 50 Accounts does it on a line by line basis, Sage 200 Accounts does it on the total.

John - A quick question bud

How does Sage 200 treat mixed supply invoices? I presume it must refer back to the Vat rate defined in the stock code :|

Tony.

 

[johndon68]

John - A quick question bud

How does Sage 200 treat mixed supply invoices? I presume it must refer back to the Vat rate defined in the stock code :|

Tony.

Indeed it does but, to the best of my understanding, it keeps totals for each VAT Code used on the invoice and will then work out the VAT on the whole order from those totals. So, it adds up all the Net amounts for Standard VAT and calculates the VAT based on that total and so on.

John

 

[maxh]

Oh no! I've been rounding VAT itself up to 18%!!

Nah jk lol