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VAT calculation functioning incorrectly


Simon Mogridge

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Hi,

 

I recently installed 'Express Invoice' and have paid the basic amount after the time trial ended.

 

I've just noticed today that although all of my settings appear to be set to calculate the VAT at the UK 20% the actual figure that is being calculated by the software is 16.66%

 

I've double checked all of my previous invoices that I've sent to clients and... they are all incorrect!

 

I've gone to the prefernces and checked everything and it all appears correct - I've even tried adding a new VAT standard at 20% and it still won't calculate the VAT correctly.

 

...any ideas?

 

Any help would be greatly appreciated!

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Guest N C H_TM

This may be happening if you have the Tax Options set to "Item prices are tax inclusive." Please go to Options >> Tax >> Tax Options and see if that box is ticked. If it is, when you add an item and set the Unit Value the amount includes the tax in the total value. For example, an item that has a Unit Value of 100.00 (tax inclusive) includes 83.34 for the item and 16.66 for the tax of 20%.

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Hi Again!

 

Hope you don't mind but I've now got another VAT calculation problem that I can't seem to work out!

 

I'm sure it's very basic...

 

All of the items that I sell are priced to include VAT already - If I create an invoice for an item that I've sold for £100 that is inclusive of 20% VAT how do I get it to calculate the VAT paid from the sale price and display that amount on the invoice for the customer ie. £80 + 20% VAT = £100?

 

At the moment when I put in the final sale price of £100 the invoice is adding another 20% VAT making the total £120?

 

Many thanks again!

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Hi,

 

I'm quite desperate to find a solution for this as I have to reissue nearly 60 invoices today that were all calculating the VAT at only 16.66% instead of the 20% that I thought was being calculated (my school boy error!).

 

Sorry to sound dumb but where is this 16.66% coming from and what is it? Surely 20% of 100 is 20 not 16.66?

 

I've gone back to the preferences and have selected the option that states "Item prices are tax inclusive (presumed to already include tax)" which I'm assuming is the correct thing to do but even though the VAT amount is set to 20% it's still calculating the VAT at 16.66%.

 

I've been through all the options one by one and having the "Item prices are tax inclusive (presumed to already include tax)" option selected is the only way I can seem to get the total price to state what the customer has paid - the VAT amount that is being calculated howerver is not 20%?

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ooops!

 

Okay... I've realised what an idiot I am! :blink:

 

20% added to £100 is £120 but 20% added to £80 (20% deducted from £100) is not £20 it's actually £16

 

So... I've found out I'm an idiot and that my pre VAT sale prices are higher than I thought all in one morning!

 

Thanks again for your help!

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  • 3 months later...

I still cant seem to make sense of this, im trying to invoice a customer as a contractor, so the client pays my tax for me and only gives me the wages minus the 20% tax but i cant get it to say that on my invoice, say i make £700 a week but 20% goes to tax, my invoice should show

Labour £560

Tax £140

Total £700

 

Or is it my brain that is not working?

PS im no accountant

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well im using express invoice version 3.68, i go to create a new invoice & enter clients details then i go to add item,

quantity : 50( 50 hours per week)

item code : labour £14 p/hr

description : labour £14 p/hr

tax : VAT20%

unit : 14

discount : 0

 

When looking at subtotal £583.34

When looing at VAT20% £116.66

Lastly Total is £700

 

I know i should be earning £560 & the tax should be £140 & the total should be £700 but i just will not come out like this, why?

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Ex-Invoice calculations looks right to me for tax-inclusive case.

1) "Taxes are always applied on subtotal" (not total), and

2) "subtotal + taxes on subtotal = total"

 

From above: 583.34 + 20% of 583.34 = 583.34 + 116.66 = 700. This is correct.

You are trying to apply taxes on final total $700. What you are trying to do is: total - 20% on total = 700 - 20% of 700 = subtotal. I don't think, I have ever seen this for taxes calculations.

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well im using express invoice version 3.68, i go to create a new invoice & enter clients details then i go to add item,

quantity : 50( 50 hours per week)

item code : labour £14 p/hr

description : labour £14 p/hr

tax : VAT20%

unit : 14

discount : 0

 

When looking at subtotal £583.34

When looing at VAT20% £116.66

Lastly Total is £700

 

I know i should be earning £560 & the tax should be £140 & the total should be £700 but i just will not come out like this, why?

 

Hi A-men,

 

I have been looking at this for over an hour and tryed to work you are getting £140 is 20% of £700.

 

I have a course on accounts and I can not get it to work out what your tax your getting (£140)

 

try this on a calculator and you will see for yourself that 700 / 1.20 will be 116.67 in tax you take your answer from £700. I am thinking who ever told you what you have been saying is doing you up to your eyes.

 

If you know someone who know there accounts go and ask them because I am lost and I have done it a few way and can not get it to work out 20% of £700 = £140

 

look at this way

 

£14 an hour inc 20% and you have worked 50 hours then that is £700 inc 20%

 

if you do what I said above means you should get £583.33 ex 20% vat which means vat is £116.67 . I can not get 20% of £700 to work out as £140.

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A-men,

 

I have still been trying to work this out. I think I have. I think the vat rate should be 25% you should be working with and not 20%.

 

If I use 25% and take it from £700 it works out as you where trying to do. I do know that the vat rate is 20% on goods but I am not sure if it changes when you do work for someone as labour. You need to check this out as soon as you can as can if it is 20% like I have said above in my last post you have been done.

 

If it is 25% then add a new vat rate and set it to be default for that item by setting it under that item.

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Hi,

 

I originally started this topic a while back because I was experiencing the same problem... the software was actually functioning correctly.

 

If you add 20% to 100 you get 120.

If you deduct 20 from 100 you get 80.

 

Logically you would think that when you invoice someone for a total of £100 the invoice would simply show £80 + £20 VAT

 

I know it sounds ridiculous but... that calculation is not correct!

 

The reason for that is because if you add 20% to £80 the figure you apply would not be 20 (because £80 is a smaller figure than £100).

 

20% of £80 is actually only £16!

 

Here's a link to an online VAT calculator where you can play around with applying and deducting VAT from any figure you choose:

 

http://www.vatcalculator.co.uk/

 

If you try adding 20% VAT to £80 you will get £96 (£16 VAT = 20% of £80).

 

If you try adding 20% VAT to £100 you will get £120 (£20 VAT = 20% of £100).

 

If you try deducting 20% VAT from £100 the 'pre' VAT amount will actually be £83.33 because 20% of £83.33 is £16.67 (and £83.33 + £16.67 = £100).

 

Hope this is of help!

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"I know i should be earning £560 & the tax should be £140 & the total should be £700 but i just will not come out like this, why?"

 

...if you were applying 20% to £700 you would add £140 but to calculate what VAT has been paid on £700 you can't simply think "well 20% of £700 is £140 so I'll deduct that from the £700 total"

 

...if you deduct £140 from £700 you are left with £560.

 

20% of £560 = £112 VAT (not £140)

 

£560 + £112 VAT = £672 (not £700)

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Wow guys I hope this is not the case because i have been doing my invoices like this for about 8-9 years now lol ! I have a friend who is an accountant & I will ask him but I suppose because it looks logical I never thought to question it.

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A-men,

 

It looks like it and the ones you have been working for would be only paying the vat of £560 which would be £112 add this to £560 which is £672 is what you were been paid and you have done yourself by £28 inc vat if you take the vat off that it would be £23.33 have been losing a week, which does not seem bad on till you look at 52 weeks in 1 year and then 8-9 years of doing it.

 

I would say you should check it out as soon as you can.

 

Tony

 

 

Here is the way I do my vat work outs. take £700. and 20% vat

 

To add vat to 700 you will x it by 1.20 and you will get it with vat

( 1. is as if you divided it by 100 after you multiply it by 20, so just put the vat after the point like so 1.20 and then you will get the total inc vat)

 

To take away the vat from 700 you will divide it by 1.20 and you will get the total ex vat.

( 1. is as if you multiplied it by 100 after you divided it by 20, so just put the vat after the point like so 1.20 and then you will get the total ex vat)

 

Hope this helps you in the future

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Wow and I was concerned that EA wasnt working out VAT correctly when it hit a half pence.

 

Some fundamental maths here and MCGCS shows it.

 

20% of 700 is not the same as 20% of 560, added to, or taken away. So you cant expect 700 -20% to equal 560 + 20%, if you can get it work out, we wont need to work for a living, we can simply shuffle numbers like the city.

 

If your invoice to your customer is £700 then you will net £583.33, and EA wil give you this figure and it is correct. If you want £560 net then your invoice will be £672. If you've invoiced like this in the past, then you've been over charging your customer at £700 and keeping £560, then you've overcharged your customer and I'm surprised they havent noticed the strange calculation on the invoice. Of course Mr VAT has also made some extra cash too. If the customer has agreed to £700 a week then you've lost out to Mr VAT and should reclaim.

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  • 3 weeks later...

A-Men ....

 

What you seem to be doing is calculating you total figure by 20% therefore giving you a figure of £140 (£700 x 20% = £140) however that would be if your final figure was to be £700 + VAT. If your actually cost of the job less VAT then the calculation is different ... it is 700 divided by 1.2 giving you a cost before tax of £583.33 and a VAT amount of £116.67 = Total incl VAT of £700

 

Now I am no accountant and I struggled with this adding tax deducting tax until a friend introduced me to a little APP for my iPhone .... its called Sulfur VAT :)

 

And if you have been paying too much tax to the VAT man for the last 9 years you might be due a nice refund LOL .... ask your accountant friend :)

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