TXWhy is 17.5% and 7/47 sometimes used to calculate output VAT? need some tips on the VAT fraction

Hi

17.5% is the VAT you must add to a sale amount for example:

Sale £100
VAT @ 17.5% = 100 x 17.5% = 17.50
Total selling price = 100 + 17.50 = 117.50

If instead you were only given the £117.50 (ie gross total rather than net)and had to work out the VAT this is where you would use the VAT fraction to get the VAT element.

For £100 you know that there will be an additional 17.50 VAT

so 17.50/117.50 = 7/47 this is how the VAT fraction is calculated.

This can then be used for any amount, for example:

For a sale of £450 gross, what is the VAT element:

450 x 7/47 = £67.02

In summary 17.5% should be used on the NET cost to find the VAT whereas 7/47 should be used on the GROSS cost to find the VAT element.

Thanks Sarah, that makes a bit more sense.

On the example then, why is the NET needed?

What are the VAT fractions then for different VAT rates? When VAT is 15% and when it will be 20%?

I haven't seen the question so can't really see which numbers have been used to explain why. Can you post the relevant bits of the question and i might be able to help?

The NET would be used where this is available (then multiply by 17.5%), if the NET is not available (this might not be split out for non-VAT registered customers) then you would have to use the GROSS (and multiply by 7/47).

The VAT fractions for different rates:

15% 15/115 = 3/23
20% 20/120 = 1/6

Sarah