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?