VAT round down or to nearest?
Wednesday 29th March 2006
What's the correct way to calculate VAT, is it to round to nearest, or truncate?
For example, should the VAT on 17,154.78 be:
3,002.09 or
3,002.08
(the actual figure is 3,002.0865)
Wednesday 29th March 2006
round in your favour
Wednesday 29th March 2006
It doesn't really matter. I tend to do the normal "accounting" thing of rounding up over 50p and down if under 50p. I think the VAT man will not mind what you do.
Wednesday 29th March 2006
It can be a tricky one. Had a system that did normal rounding which VAT man was fine with. It also had a check to see if the vat of the total amout was the same as the sum of the individual amounts. There was a margin of 3p I recall. If this was exceeded a document was automatically printed showing the line items, explaing the problem and had to be filed with the other VAT stuff ready for any inspections.
If you are selling enough items with sub totals then it can come up fairly often just by chance.
Wednesday 29th March 2006
Do it the same way as your accounts package, otherwise you'll have to make 1p adjustments all the time!
davidy
Wednesday 29th March 2006
In the eyes of HMRC you can round up or down, but whatever you choose, you must then use this for all calculations, i.e. if you round up, then you must always round up... this applies to both input tax and output tax.
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