Please help with online VAT calculation


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Hi accountants... I am not, and need a view on VAT that is driving me nuts!

I am a web developer, currently working on a high end commerce system. All prices within the database are net.

So, lets say an item is £5 gross, that is 4.17 net.

4.17 x 1.2 = 5.004, rounded is 5. lovely.

2 items at 5 would be 10 as expected!

However, 2 x 4.17 = 8.34 x 1.2=10.008, rounded is 10.01

is it correct to add them gross and then calculate the difference (being VAT), or should they be calculated net with vat added (getting me an annoying extra 1p)?

I need to lose that 1p or else customers are going to start complaining!

Thank you for your views in advance...
 
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Jul 29, 2012
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Hi accountants... I am not, and need a view on VAT that is driving me nuts!

I am a web developer, currently working on a high end commerce system. All prices within the database are net.

So, lets say an item is £5 gross, that is 4.17 net.

4.17 x 1.2 = 5.004, rounded is 5. lovely.

2 items at 5 would be 10 as expected!

However, 2 x 4.17 = 8.34 x 1.2=10.008, rounded is 10.01

is it correct to add them gross and then calculate the difference (being VAT), or should they be calculated net with vat added (getting me an annoying extra 1p)?

I need to lose that 1p or else customers are going to start complaining!

Thank you for your views in advance...
the correct way to account for different products is to work them out seperately first! so it should look like this:

£5.00/6 = £0.83 VAT & £4.17 NET

so 2 lots of the above would be £1.66 VAT & £8.34 NET

they should be calculated for the VAT & NET figure first.

so if you had an item costing £10, it would be £1.67 VAT and £8.33 NET

you could do it the way you have described, but in some views this would be classed as incorrect. if you do chose to calculate it how you have, as the difference is only 1p, you can round it down to get your £10.00. Personally i feel the most accurate way is to work out the VAT from the gross figure of each product first, allowing you to round the VAT per item.
 
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