Indirect Tax

JamesM

I've went through the first practice assessment and this question has racked my head.

A VAT registered trader makes a mixed supply to customers as follows:

Standard rated items for £683 plus VAT
Zero rated items for £128
An early settlement discount of 2.5% is offered

How much VAT should be included on the VAT invoice?

I've looked at the answers, can anyone explain how you get the figure of £133.18?
Thanks

Platt

You have to take into account the 2.5% discount when calculating the VAT in this instance.

First take the 2.5% discount from the standard rated items:

£683 - 2.5% = £665.925

Then work out how much VAT should be added to these items:

£665.925 x 20% = £133.18

As the other items are zero-rated, this figure is how much VAT should be included on the VAT invoice.

Hope this helps!

JamesM

Thanks, I think that that was the only thing I didnt try!

lornahill

The rule is that you always need to take off discount before VAT I am sitting this exam next week and lots to remember!