Closed tmcdos closed 6 years ago
Hey @tmcdos, I'm not sure 2000 * 16.5/20
is correct. I believe you pay VAT on the full amount, 12,000 in this example, so 12,000 * 16.5/100 = 1980
Leaving you with 2,000 - 1980 = £20
.
This calculator seems to confirm it:
I also had a glance at my recent accounts and I'm pretty sure it matches the formula in the article.
Feel free to re-open the issue if I'm still wrong on this one :)
You are right - I completely neglected the fact that the flat rate VAT is over the inclusive amount
instead of the standard amount
. So in fact you do not gain 3,5% as I initially though - you only gain 0.2%
In your example, the price for the customer is 10,000 and you add 20% VAT so it becomes 12,000 because 20% of 10,000 is 2,000. HMRC takes 16,5% instead of 20% - so it should be 16,5/20 of 2,000. And this makes 2000 * 16.5/20 = 1650 leaving you a lot more than 20 pounds.