VAT calculations on multiple items

[finlay666]

Just a quick Q as we were having a discussion at work on how VAT should be calculated on multiple items. There seem to be a number of ways but not sure on the correct way.

Example:

I buy 3 items that are (ex vat) 1p each, that is 3p ex vat

Now the vat per item is 0.2p and total is 0.6p

so should the total inclusive of VAT be 3p or 4p? So is calculating VAT per item pre total or post ex-vat total correct?

There are discrepencies every 5 items, so 8 items has the same discrepency +1p difference

[Rob_B]

Per item.

Although I'd imagine it gets rounded up especially with your 1p items

[Barakka]

VAT Returns do not have a pence column.

[finlay666]

Per item.

Although I'd imagine it gets rounded up especially with your 1p items

So the correct price is 1p per item still then? and the total inc vat is 3p?

I imagine it does, it's just difficult to find anywhere that gives a clear cut answer where multiple items cause the increase

[finlay666]

VAT Returns do not have a pence column.

This is for invoicing though, not VAT returns, still makes a difference though on the scale of it over time and for large quantities of items

[Barakka]

This is for invoicing though, not VAT returns, still makes a difference though on the scale of it over time and for large quantities of items

Sorry, what I meant is the general rule would be to pick one and stick to it, either per item, or on the total, and make sure it's clear on the invoice, but don't worry about single pence oddities as they are lost on the return.

That's been my experience when writing invoicing stuff, provided the accounts person/team is aware of how it's been calculated they can work out the answer to any query they have.

[finlay666]

Sorry, what I meant is the general rule would be to pick one and stick to it, either per item, or on the total, and make sure it's clear on the invoice, but don't worry about single pence oddities as they are lost on the return.

That's been my experience when writing invoicing stuff, provided the accounts person/team is aware of how it's been calculated they can work out the answer to any query they have.

I'm aware of picking one and sticking with it, but we do work for other places that are both B2B and B2C and so it's more a way to find a definitive answer.

for the example given, if it's 1p per screw and someone orders 100 million, that is £200,000 in vat not charged if it's rounded per item

[Rob_B]

I'm aware of picking one and sticking with it, but we do work for other places that are both B2B and B2C and so it's more a way to find a definitive answer.

for the example given, if it's 1p per screw and someone orders 100 million, that is £200,000 in vat not charged if it's rounded per item

But you don't sell 1 screw at a time, you sell 10,000 screws for £10 so the VAT would be on the multiples of £10 (I imagine)

[Barakka]

But you don't sell 1 screw at a time, you sell 10,000 screws for £10 so the VAT would be on the multiples of £10 (I imagine)

Exactly, in invoicing terms per item means per LINE item, so quantity x price = item

[mycarsavw]

In your 1p screw (fnar) example the VAT should be calculated at 4 decimal places and then rounded to 3, per screw.

In their own words.

[finlay666]

In your 1p screw (fnar) example the VAT should be calculated at 4 decimal places and then rounded to 3, per item.

In their own words.

Thanks, a screw was an easy example, it was more to refer to anything with a low price ending in 1p, £1.01 or £100.01 do the same

[finlay666]

But you don't sell 1 screw at a time, you sell 10,000 screws for £10 so the VAT would be on the multiples of £10 (I imagine)

But VAT calculations give you the option per item or per line

[mycarsavw]

Thanks, a screw was an easy example, it was more to refer to anything with a low price ending in 1p, £1.01 or £100.01 do the same

I'd employ the same methods for all calculations, just to be safe/consistent.

IMHO, 4 decimal places is a bit extreme, but using the rule above would mean you're covered should anything ever retail at such a low price.

[chadders]

As long as you store the VAT ex and VAT inc (or just VAT) amount you'll be fine, and think of selling to non-VAT countries, and it'd be typically done at line-level (thinking of the structure of an invoice).

Go look at examples eg Amazon.

edit: as long as what you receive in VAT is passed on as VAT you'll be fine

[oolon]

I believe if you do the calculations per line to need to do it for 4 decimal places, then round down to 2 in the total or you total the X-VAT prices then do the vat calculation at the end.

[finlay666]

As long as you store the VAT ex and VAT inc (or just VAT) amount you'll be fine, and think of selling to non-VAT countries, and it'd be typically done at line-level (thinking of the structure of an invoice).

Go look at examples eg Amazon.

edit: as long as what you receive in VAT is passed on as VAT you'll be fine

You have missed the point

Ex vat = VAT in this situation where it is a low price but VAT is applicable. so 1p ex vat is 1p inc vat, and as a result the VAT is wrong on large quantities at a line level on base calculations for regular customers.