Indirect Tax

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?


  • Platt
    Platt Registered Posts: 4
    edited February 2015
    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
    JamesM Registered Posts: 7
    Thanks, I think that that was the only thing I didnt try!
  • lornahill
    lornahill Registered Posts: 6
    The rule is that you always need to take off discount before VAT :) I am sitting this exam next week and lots to remember!
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