Indirect Tax
tillytots
Registered Posts: 14 New contributor 🐸
Please can someone help me, I am trying to work out the sum below the old way, not quite sure how they work out the answer.
The question is: A trader making standard rated (17.5%) supplies, has joined the flat rate scheme. The flat rate percentage applying to his business sector is 8.5%. His VAT exclusive turnover for the quarter is £30,000. What is the VAT due to HMRC for the quarter? The answer is £2,996. They work out the answer as follows (30,000 x 117.5%) x 8.5% = £2,996.
I used to work out by x 17.5%. So am getting very confused as to how they get 117.5%.
Many thanks in advance.
The question is: A trader making standard rated (17.5%) supplies, has joined the flat rate scheme. The flat rate percentage applying to his business sector is 8.5%. His VAT exclusive turnover for the quarter is £30,000. What is the VAT due to HMRC for the quarter? The answer is £2,996. They work out the answer as follows (30,000 x 117.5%) x 8.5% = £2,996.
I used to work out by x 17.5%. So am getting very confused as to how they get 117.5%.
Many thanks in advance.
0
Comments

There are 3 possible ways of doing it:
x 1.175
x 117.5%
+ 17.5%
You said x 17.5%. This sum only works out the VAT, it doesn't work out the net+VAT. For that you need one of the 3 methods I listed.
You need the gross (i.e. net + VAT) because flat rate % is applied to the gross, not the net.0 
Hi Tilly,
£30,000 x 117.5% = £35250 is merely a different way of saying £30,000 plus 17.5% of £30,000, which is £5250, = £35250
You're taking the £30,00, 100% of it, plus another 17.5%, so putting x 117.5% it's a shorter way of writing it.
Hope you know what I mean.0 
Flat rate VAT is based on the Value of Gross sales.
You are given Net Sales and therefore you need to add on 17.5%. You can either times 30,000 by 17.5% and then add this on to 30,000 or just multiply 30,000 by 117.5% (1.175 on a calculator):
30000 x 17.5% = 5250
30000 + 5250 = 35250
or
30000 x 117.5% = 35250
Now that you have gross sales you can calculate the VAT due to HMRC which will be 8.5% of the Gross figure calculated previously:
35250 x 8% = 2996.25
I hope that helps
Nick0 
Haha i knew i was taking too long to type.0
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