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Noola


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Dividing by 6 for VAT quick question
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I've just thought to myself whilst working out the vat on fuel why we divide it by 6? 20% of 100 is 20. There is 5 x 20 in 100.

Is this because we are working out the figure from 120 and not 100 for example so we need to include the 20% that was added to the 100?

If that makes sense. I'm tying myself in knots just thinking about it. I think too much! confuse



-- Edited by Noola on Thursday 31st of March 2011 01:24:27 PM

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gbm


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Yes, if you're looking at the VAT inclusive figure, it already has 20% added on.

Take an amount of £100 net. The VAT on this is 20%, £20. This gives a gross of £120.

So the VAT element is 20/120, which cancels down to 2/12 and then to 1/6.

This explains why when the VAT rate was 17.5%, it could be cancelled down to 7/47.

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Shamus


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Hi Kay,

it's because the original figure is inclusive of VAT.

If you add VAT at 20% to £100 then the figure is £120.

However, 20% of £120 is £24 leaving capital of £96

If however you work it on the basis of *1/6 then the answer is £120 / 6 = £20 leaving capital of £100.

Simples

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Shaun

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Shamus


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Hi Nick,

snap.

your just faster at typing than I am.



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Shaun

Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Noola


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Thanks for your replies! The most simplest things really confuse me.

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