1. avatar says

    Sir, it is not very clear from tax point of view: Normally we should charge 18% tax on the sale=960*18%=172.8, but we charge less(164.16). In my country this would be tax calculation error and imply tax penalties. Tax is always calculated as a fixed percentage on the amount you declare as a sale. You cannot declare a certain amount, and then calculate 18% on a different amount..
    Second: What if customer fails to pay in advance: It would imply that our tax is lower than it should have been: our sales amount is 960, tax 18% should be applied on this amount. Are you sure sales tax must not be recalculated in this case?

    • Profile photo of John Moffat says

      Yes, I am 100% sure! It is the tax rule in the UK.

      However you will have noticed that the example is not any longer in the Lecture Notes (which I assume you have downloaded because otherwise there is no point in watching the lectures). I am going to remove the lecture as well because (as I wrote in response to an earlier question below, it would now be unfair for it to be asked in F3 since it is a tax rule rather that an accounting rule.

      For your information. The tax authorities do not have a problem with this for two reasons – firstly such discounts are usually only given from business to business and so the customer business only can claim back the VAT charged – the net effect to the tax authorities is zero. Also they do say that the discount must be a commercial rate which means it would only ever be pretty small and so the affect on the amount of tax would be very small.

  2. avatar says

    so I understand that, sales tax isn’t representing in inc statement. if it is not paid until end of year it will shown in statement of financial position? under liabilities?

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