UK VAT set up

[WBNI]

Hi there, I'm hoping someone can provide a solution to an issue I am having.

We are registering for UK VAT 20% in January and I have been testing how this will work in our shop and customer receipts etc.  We are using square terminal and have all our inventory loaded onto it. 

I have created a new tax - 20% and requested our current products prices include VAT. I would expect this to calculate at 20 pence for every £1.  

However on a £1 sale its printing that the tax amount is 17 pence.  The percentage is correct within the settings and I don't know why its doing this. on a £6 sale it calculates the VAT amount as £1 instead of £1.20.

Can anyone help with this as we need it to go live and work correctly next week.  I have tried square support with no avail. If I don't select to include Vat in price it calculates it correctly. E.g. a £1 item is £1.20. as our current inventory prices already include Vat I don't want to have to manually change them all!

thank you 

[tranguyen · Accepted solution]

Welcome to the Seller Community @WBNI! 

It sounds like you currently have tax set to be included in the item's price. This means if the item is priced at £1.00, the 20% is already included. When that's the case, the calculation for tax is actually tax = (tax x item price) / (1 + tax rate).

Using that calculation and the item price of £1.00, you'd have (20% x £1) / (1 + 20%) = 0.16666 which, using bankers' rounding, is 0.17. 

If the £1.00 is the net price before VAT is added, then the total will be £1 + (20% x £1) = £1.20

You can check using an online VAT calculator like this. Here's the calculation:

I hope this will help!

[WBNI]

Thank you for your help.  I don't know what I was thinking or how I have confused myself over something so simple! I just had in my head it should be 20p to the £1 but that would only apply if current price didnt include Vat. thanks again. Happy New Year 🙂