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Thank you for your question ...
You should charge VAT at standard rate on only the Vatable item. As an example if the novelty gift product contains personalised framed certificate at £20, the book at £8 and map at £2 then your invoice value should be (20+4)+8+2 = £34 and you would pass £4 to VAT Office.
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Thanks for the prompt reply
The gift is sold as a package for £20, the customer does not buy each item seperately, so I am not sure how to apportion a retail value on the book and map
I obviously know the cost price of each item and my markup is roughly 3 x cost. If the book and and map combined cost £2 and my markup is 3x, that gives them a retails value of £6. Would I deduct that from the £20 and pay VAT on £14?
Thank you for your reply.
You are right.. you would pay VAT on £14 inclusive of VAT value ... ie £.2.33 made up of
vatable element (11.67+VAT £2.33) = 14.00
Not VAtable element = 6.00
Total gift pack value incl VAT (14.00+6.00) = £20.00
so would I effectivley put this through my accounts package at a VAT rate of 14%?
Would I have problems with HMRC when I submit online VAT returns?
Provided your mix of vatable and non vatable remains the same ie £14 out of £20 is taxable supply inclusive of VAT then the percentage would come to
Sales value ex VAT (11.67+6.00) = 17.67
VAT = 2.33
Invoice value (17.67+2.33) = £20.00
Average VAT rate on ex VAT value (2.33/17.67) = 13.19%
Average VAT rate on inclusive of VAT value (2.33/20.00) = 11.65%
I have assumed that the novelty gift package priced at £20.00 is inclusive of VAT where applicable.
I don't understand where you get VAT rate of 14%.
If you were to apply the rate as I have calculated you should not have any problems when submitting your VAT returns online.
I got 14% from dividing the Vatable amount (£14) by the total amount (£20), to calculate the % amount that is vatable whch equalled 70%.
I then thought that I had to pay 70% of the 20% VAT rate, which = 14%
Thank you for your reply
You should do your calculations as I have done them.
£14 of £20 is inclusive and not exclusive of VAT at 20%.
If you apply ex VAT values then (11.67/17.67) = 66%, then (66% of 20% VAT rate)becomes 13.2%. If you were to apply 14% rate, you will be paying more VAT than is right.
thank you once again for your help
Just to calrify ....
You should apply either
13.2% to your VAT exclusive price or
11.65% to your VAT inclusive value.
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