Andrew Needham looks at the rounding of VAT on invoices and by retailers.
VAT is calculated as a multiple of the selling price, and so it often does not come out as a whole penny. For example, a business sells an item at £3.43 net of VAT. The item is standard-rated, so the VAT on this is £0.686, which is not a whole penny. Does a business round it up or down?
What does HMRC say?
By concession, HMRC will allow invoice traders to round down the VAT due but only where the amount charged to customers and the amount paid to HMRC is the same. HMRC will also allow rounding down on each line of an invoice, not just the invoice total, as each line represents a separate transaction.
However, HMRC guidance on this is unclear as it goes on to say that rounding down to a whole penny is not allowed and should
