Home For AAT student members AQ 2016 Professional Diploma in Accounting General discussion - Professional level
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Gross and net

Hi all
At the risk of sounding completely thick I have a question...
So currently studying the personal tax module, and gross and net amounts came up.
So gift aid payments total £800 net gross equivalent £1000.

This got me thinking about the 20% vat etc and the dividing by 1.2, so why are we dividing by 1.25 here???
Having a total blonde moment.. can someone help?
Thanks

Answers

  • douglasstrouddouglasstroud Registered Posts: 155
    Because with one you are trying to find out the figure before the 20% was taken off
    1000 - 20% = 800
    Which would be 100/80 (1.25) x 800

    Where as with the other you are trying to find out the figure before 20% was added on
    833 + 20% = 1000
    Which would be 1000/1.2
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