VAT rounding change

In the May 2005 edition of BT's _Update_ flier which goes out with domestic bills, there's a little paragraph on p10 headed "Changes to VAT charges on your BT Bill" and reading "The way VAT is added to your BT Bill will change. Currently the VAT total is rounded down to the nearest penny but as of the June 17th 2005 [sic] VAT will be rounded up to the nearest whole penny."

This was reported on BBC2's _Working Lunch_ on 2nd June, but not at all satisfactorily. A little preliminary checking on my part in the VAT700 guide indicates that BT isn't permitted by HMCE (now HMRC) to round VAT in this proposed fashion, but before I get my guns blazing I'd like to check the facts with people here, who might know a lot more about exactly how VAT has been dealt with in the past on these bills and how exactly it's going to change.

What's odd -- and this is one thing which Working Lunch DID report correctly -- is that the only winner out of this proposal is HMRC, not BT. Unless BT is going to switch to some kind of "averaging" method for repaying VAT to HMRC, in which case it does become advantageous to notch up the amounts it collects...

Matti

Reply to
Matti Lamprhey
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you posted this in uk.telecom 4 hours ago snipped-for-privacy@individual.net , would it not be better to have used crossposting or stike to one newsgroup ?

there are two replies on there.

Phil

Reply to
Phil Thompson

In retrospect, it would. I posted there first because I expected the telecom folk to be more aware of the specifics of VAT rounding on phone bills, whereas the initial replies seemed to accept that rounding UP (eg

1.2p is charged as 2p) is absolutely fine by HMRC rules, which gobsmacks me. So I posted a similar message here to get another angle on the topic. I'm sorry if this has upset your admirable spamcop sensibilities!

Matti

Reply to
Matti Lamprhey

Weird choice of groups, given the choice. Why not uk.business.accountancy ?

When you're investigating something, first use a usenet archive service such as Google Groups to a) check that it hasn't been answered before, b) gain some background information and c) discover the most appropriate group.

Daytona

Reply to
Daytona

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I did google the groups first, and found a single mention but no discussion -- which your link demonstrates. uk.finance hosts some very sensible people, expert in VAT, and I stand by my group selection.

I'm sure you're very sensible too, so feel free to respond to my question.

Matti

Reply to
Matti Lamprhey

why the excitement as the maximum consequences of this are a whole penny ?

Phil

Reply to
Phil Thompson

I'm sure rounding is dealt with somewhere in the VAT legislation and regulations. Interesting question. Maybe uk.legal.moderated would be a good place to post.

D
Reply to
David

You do realise BT are talking about 1 penny on the entire bill - not rounding up the cost of each call individually?

Regards Sunil

Reply to
Sunil Sood

it is, rounding down is a concession they allow. snipped-for-privacy@4ax.com

VAT Notice 700 Section 17.5 ""The concession in this paragraph to round down amounts of VAT is designed for invoice traders and applies only where the VAT charged to customers and the VAT paid to Customs and Excise is the same.""

I'm not sure this is the answer Matti wanted to hear though :-)

Phil

Reply to
Phil Thompson

Let me explain how I see it, then. There are three ways of rounding fractions of a penny -- always down, always up, and to the nearest. I would say that the usual, the default, is the last of these. 20.2 goes to 20, 20.7 goes to 21. This is a neutral method, obviously. To round up (20.2 goes to 21) is always detrimental to the customer and, over the course of several invoices, will overcharge. To round down (20.7 goes to 20) is always detrimental to the VAT man, yet is permitted as a concession in some circumstances. There is no concession in VAT 700 to round UP, and I would argue that it's therefore impermissible.

Matti

Reply to
Matti Lamprhey

Of course. It's the principle I'm interested in. Either BT or HMRC is getting an extra 500 grand a year out of this.

Matti

Reply to
Matti Lamprhey

For periodically billed accounts, such as telephone and utilities, would it not be possible to take a 4th approach? Always keep track of the exact VAT and on each bill charge only the whole pence, carrying the fraction forward to the next bill.

Reply to
Graham Murray

Pointless and if BT rounded correctly which is to round down for fractions less than 0.5p and to round up for all other fractions then there would be no inequity.

Reply to
Steve Firth

BT

Reply to
davidof

Matti take a deep breath and calm down.

BT hand over to the VAT man whatever VAT they collect so they cannot make anything out of this scam.

The very worst that can happen to their long suffering customers is they lose 1p per bill.

It is foolish of me to lecture you on how foolish it is to worry about something so trivial when I myself am wasting time on it.

Reply to
Troy Steadman

In message , Troy Steadman wrote

It's amazing how being ripped off by 1p can create a problem.

JD Wetherspoon pubs had one of their beer festivals where the advertised price for every pint was 99p, which was under half the price that all other pubs in the town were charging for an equivalent beer.

The JDW staff in the local pub had decided that they didn't want to deal with the 1p change (or had just run out of small change) and were charging £1 a pint. Many people in the pub seemed to be complaining that the beer price wasn't as advertised.

Reply to
Alan

If BT hand over exactly what they collect, why are they making this change? I suspect they've agreed an "averaging" arrangement, or whatever it's called, with HMRC, and this gives them an incentive to start rounding up. How can accountants remain s-s-s-sanguine about this?

Matti

Reply to
Matti Lamprhey

"Matti Lamprhey" wrote

Don't you need an expected turnover less than 150,000 per year, to use a Flat rate scheme? Surely BT are getting much more than that??!

Reply to
Tim

It gives them a cashflow advantage. I assume they are on monthly returns, so it will enable them to hold onto the money for about 6 weeks on average.

Reply to
Jonathan Bryce

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