VAT - Per line or overall total?

[HRG]

Right, when I sell stuff Sage calculates the VAT per line then totals it up for me. However, if I add the total amounts up and then add VAT on the running total it can end up as a different amount due to rounding errors. I noticed this yesterday when I tried to put an order on from one of my suppliers who totalled the entire amount up including delivery and then added VAT which Sage disagreed with.

So what is the correct way to calculate VAT? I know it's only pence but my bank accounts won't reconcile in Sage unless I fudge it.

[plasticpig]

I have a written ruling from the HMRC somwhere stating that it dosent matter. Both are correct.

[fergywales]

If in doubt, I have always (and always been told to) go with Sage and round figures up.

But... I've jumped ship and started using a program from Diamond Discovery. Does the same, million times easier to use. Not just because they are a previous business support client and now a PR client, but because the layout, user setup and support are amazing compared to the ghastly Sage packages.

Diamond Discovery also allow you to use your own Invoice design without having to upgrade to a stupidly expense pack. Being in the design and print business, having a Sage style invoice and statement produced really gives the wrong impression to clients.

I also have the bugbear that when I sit down to have an accounting day, telling the difference from one Sage user to another can be a nightmare, especially once I'm a few hours in and thoroughly bored. If I wasn't such a tight wad, I'd pay the accountant to do it, or even better get an accounts body in, but I prefer to spend money on either company development or leave it for the dividend.

[HRG]

plasticpig said:

I have a written ruling from the HMRC somwhere stating that it dosent matter. Both are correct.

Cool, as I use Sage to submit my accounts to the accountant I'll stick with what it says. Thanks.

[Plotloss]

Blimey.

Some years ago I had this exact argument with our financial director who just could not get her head around why the line VAT totals didnt add up to the overall VAT total.

That was my first commercial programming assignment and it put me off programming and people for that matter, for life.

[HRG]

I must admit I had a few WTF moments before I figured it out

[zadumbreion]

Funny, that's just reared it's head with our accounts package (Quickbooks). One of our customers is underpaying our invoices by 1p every time (it's a recurrng charge) because when Quickbooks calculates the VAT on each item line, and rounds it to 2 decimal places, then the rounding errors creep in.

I was hoping that the legal position would be - our method of calculating the VAT is not incorrect, and therefore they should pay the full amount.