[VAT] Calculation of VAT at retailers'


E

Elizabeth Smith

Hello,
Long time no see.


VAT Guide (Notice 700)

<quote>
6.10A Calculation of VAT at retailers
....
If you do not use a retail scheme, but instead calculate VAT at line
level or invoice level, you must not round the VAT figure down. You may,
however, round (up and down) each VAT calculation.
</quote>

What do they mean by "VAT figure"?
- the VAT per line?
- the final VAT total?

What do they mean by "VAT calculation"?
- calculation of VAT per line?
- calculation of the final VAT total?

If calculating VAT at line level, is the calculation not the same as
described in "6.10 Calculation of VAT on invoices"?



While 6.10 gives an accurate description of the algorithm to be applied
for invoices, 6.10a seems rather wishy-washy.

--


Best Regards,

Elizabeth Smith
 
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R

Ronald Raygun

Elizabeth said:
Hello,
Long time no see.


VAT Guide (Notice 700)

<quote>
6.10A Calculation of VAT at retailers
...
If you do not use a retail scheme, but instead calculate VAT at line
level or invoice level, you must not round the VAT figure down. You may,
however, round (up and down) each VAT calculation.
</quote>

What do they mean by "VAT figure"?
- the VAT per line?
- the final VAT total?

What do they mean by "VAT calculation"?
- calculation of VAT per line?
- calculation of the final VAT total?
"Both" to both questions, I'd have thought. That is to say, with
reference to the introductory paragraph, if you calculate VAT at line
level then the VAT figure is the VAT per line, and if you calculate at
invoice level it is the final total, and in both cases "VAT calculation"
is the process by which you arrive at the "VAT figure".
If calculating VAT at line level, is the calculation not the same as
described in "6.10 Calculation of VAT on invoices"?
No, that calculation includes the option to round down to nearest 0.1p.
Here rounding down is specifically forbidden.

What is not clear from the wording is whether that means you should round
to whichever of (a) the nearest whole penny, or (b) the nearest half penny,
is nearer, or whether you have a choice between two methods, i.e. either
rounding to the nearest whole penny (i.e. always working to two decimal
places of pounds) or to the nearest half penny (i.e. always working to
"two and a half" places) it being understood that whole pennies also
count as half pennies in the same way as they also count as tenths.

I suspect what it means, though unfortunately they stop short of
actually saying this, is that you have to work to 200ths of a pound
at all times and not just to 100ths, certainly if calculating at line
level, and then you add up the rounded line VAT figures to give the
invoice VAT total, and this, if it contains an odd half penny, must
be rounded up. If not calculating at line level, it seems that you
must still round the final total to the nearest half *and then* to
nearest whole, which seems unfair, since it means where the fractional
part of the VAT figure is a quarter penny or more, it must be rounded up.
While 6.10 gives an accurate description of the algorithm to be applied
for invoices, 6.10a seems rather wishy-washy.
Agreed. It is vague by specifying that you must not use truncation
(rounding down) as an algorithm, but must use proper rounding (to nearest)
but it fails to specify the granularity.

The notice 700 I found on hmrc site, by the way, numbers these sections
17.5 and 17.6, not 10.6 and 10.6A. It's dated April 2002. Is yours more
recent?
 
E

Elizabeth Smith

Hello RR,

In <NwpPe.96264$G8.24116@text.news.blueyonder.co.uk>,
"Both" to both questions, I'd have thought. That is to say, with
reference to the introductory paragraph, if you calculate VAT at line
level then the VAT figure is the VAT per line, and if you calculate at
invoice level it is the final total, and in both cases "VAT calculation"
is the process by which you arrive at the "VAT figure".


No, that calculation includes the option to round down to nearest 0.1p.
Here rounding down is specifically forbidden.

...

I suspect what it means, though unfortunately they stop short of
actually saying this, is that you have to work to 200ths of a pound
at all times and not just to 100ths, certainly if calculating at line
level, and then you add up the rounded line VAT figures to give the
invoice VAT total, and this, if it contains an odd half penny, must
be rounded up. If not calculating at line level, it seems that you
must still round the final total to the nearest half *and then* to
nearest whole, which seems unfair, since it means where the fractional
part of the VAT figure is a quarter penny or more, it must be rounded up.
Damn, I'll need to have another look at my implementation.
Agreed. It is vague by specifying that you must not use truncation
(rounding down) as an algorithm, but must use proper rounding (to nearest)
but it fails to specify the granularity.
Why can't they write a clear spec?
I suspect if you phoned them they wouldn't be able to tell you either
what exactly it was they meant.
The notice 700 I found on hmrc site, by the way, numbers these sections
17.5 and 17.6, not 6.10 and 10.6A. It's dated April 2002. Is yours more
recent?
Oops, I had two copies and was looking at the older one from 2001.

--


Regards,

ES
 
E

Elizabeth Smith

In <NwpPe.96264$G8.24116@text.news.blueyonder.co.uk>,
No, that calculation includes the option to round down to nearest 0.1p.
Here rounding down is specifically forbidden.

What is not clear from the wording is whether that means you should round
to whichever of (a) the nearest whole penny, or (b) the nearest half penny,

I would think either to the nearest tenth of a penny or to the nearest
half of a penny, the difference to 17.5.1 being that you're not allowed
to truncate but should round instead at every calculation.

I tried to phone the Advice Line, but that's hopeless: I was sent in
circles for 10 minutes only to arrive back at the same tape I had
started with.

--


Regards,

Elizabeth Smith
 
E

Elizabeth Smith

In <NwpPe.96264$G8.24116@text.news.blueyonder.co.uk>,
"Both" to both questions, I'd have thought. That is to say, with
reference to the introductory paragraph, if you calculate VAT at line
level then the VAT figure is the VAT per line, and if you calculate at
invoice level it is the final total, and in both cases "VAT calculation"
is the process by which you arrive at the "VAT figure".

I googled around a wee bit and I came across a diffeent edition of the
VAT guide (700), unfortunately only chapters 9-18, so the date is
missing!

Section 17.5.1 is preceded by a new paragraph printed in bold:

"Note: The concession in this paragraph to round down amounts of VAT is
designed for invoice traders and applies only where the VAT charged to
customers and the VAT paid to Customs and Excise is the same. As a
general rule, the concession to round down is not appropriate to
retailers, who should see paragraph 17.6."



"applies only where the VAT charged to customers and the VAT paid to
Customs and Excise is the same"

Is that not always the case unless you run a retail scheme?!? For any
retailer whose VAT is calculated at invoice or line level that would be
the case, wouldn't it?

If you have a till system which works out the VAT precisely, then the
VAT paid to HMCR will be identical, in which case: do I need to rack my
brains over the ambiguous 17.6 at all?


I am talking about a retailer with a shop and/or a webshop (in this
particular instance a gift shop).

--


Regards,

Elizabeth Smith
 
R

Ronald Raygun

Elizabeth said:
I googled around a wee bit and I came across a diffeent edition of the
VAT guide (700), unfortunately only chapters 9-18, so the date is
missing!

Section 17.5.1 is preceded by a new paragraph printed in bold:

"Note: The concession in this paragraph to round down amounts of VAT is
designed for invoice traders and applies only where the VAT charged to
customers and the VAT paid to Customs and Excise is the same. As a
general rule, the concession to round down is not appropriate to
retailers, who should see paragraph 17.6."
This paragraph also appears in the April 2002 version I mentioned.
Sorry, I didn't realise it was "new" relative to your older one, so
I assumed you were aware of it.
"applies only where the VAT charged to customers and the VAT paid to
Customs and Excise is the same"

Is that not always the case unless you run a retail scheme?!? For any
retailer whose VAT is calculated at invoice or line level that would be
the case, wouldn't it?
Perhaps. Not sure how exactly a retail scheme is defined. Does the
second hand margin scheme count as a retail scheme?
If you have a till system which works out the VAT precisely, then the
VAT paid to HMCR will be identical, in which case: do I need to rack my
brains over the ambiguous 17.6 at all?
Yes, I think so. 17.5 says that "in general" retailers must not use the
concession. Use of the phrase "in general" seems to imply that there
exist exceptions, but there is insufficient clarity here to indicate
that non-use of a retail scheme is automatically such an exception.

Also, I don't think a "retailer" is just someone who operates a retail
scheme, but I suspect it is anyone who sells to the public, i.e. to
non-VAT-registered persons.
I am talking about a retailer with a shop and/or a webshop (in this
particular instance a gift shop).
Reading between the lines, I conjecture that the concession to round
down (which generally on average would lose HM 0.5p per invoice plus
possibly an average of 0.05p per line, and so would add up to quite a
bit of dosh across the whole market) is really intended for those output
VAT invoices which will end up also being treated as input VAT claims by
customers who are themselves VAT registered. But when selling to the
general public, well, that's where they don't want to give that
concession, because that's where they really would lose money, whereas
when they're paying back as input VAT only what they've already collected
as output VAT, it makes no difference how the figures are rounded, since
they cancel out.
 
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E

Elizabeth Smith

In <73KPe.96825$G8.65859@text.news.blueyonder.co.uk>,
Perhaps. Not sure how exactly a retail scheme is defined. Does the
As per VAT Note 727: for instance, Apportionment schemes, POS schemes -
none of that concerns my work.
second hand margin scheme count as a retail scheme?
No - that's a totally different kettle of fish (which, unfortunately,
does concern me). Used for secondhand goods, works of art ... As we
established in this group earlier in the year, goods sold within the
margin scheme require separate invoices not showing the VAT element,
which is a nuisance where the retailer sells mixed new and art.

Yes, I think so. 17.5 says that "in general" retailers must not use the
concession. Use of the phrase "in general" seems to imply that there
exist exceptions, but there is insufficient clarity here to indicate
that non-use of a retail scheme is automatically such an exception.

Also, I don't think a "retailer" is just someone who operates a retail
scheme, but I suspect it is anyone who sells to the public, i.e. to
non-VAT-registered persons.
Absolutely. Retail schemes are just a simplified option to work out VAT
liability.

Reading between the lines, I conjecture that the concession to round
down ... But when selling to the
general public, well, that's where they don't want to give that
concession, because that's where they really would lose money,
I knew there was an ulterior motive. ;-)
 

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