Accounting and calculating VAT for filing

We use an automated VAT Calculation and invoicing solution, where the VAT collected is rounded off to the nearest pence, eg below: Invoice 1: Total £10. VAT collected is £1.67 (whereas the exact number is £1.666666666666667) Invoice 2: Total £2.99. VAT collected is £0.50 (whereas the exact number is £0.498) For the purpose of filing, which of the below calculation approach would be acceptable by HMRC (VAT Standard Scheme) Approach 1: Turnover - £12.99 & VAT collected = £2.17 (ie. £1.67 + £0.50 summing up each invoice) - However, this means that Box 5 & 6 of the VAT filing would not tally accurately, and neither is this a feasible approach. Approach 2: Turnover - £12.99. I simply calculate the VAT based on the total turnover = £2.165 (ie. £12.99 / 6). This method results in accurate tallying of Box 5 & 6.

https://www.gov.uk/hmrc-internal-manuals/vat-trader-records/vatrec12000 VATREC12030 - Rounding on invoices and rounding at retailers: What do we mean by rounding up and down? The rules for this are simple: If the VAT on any transaction comes to less than 0.5 of one penny, it should be rounded down. If the VAT comes to 0.5 of one penny or more, it should be rounded up. This is the same system as that outlined in EU Council Regulation 1103/97, which sets out the rules for converting national currency values into Euro. However, if a trader proposes an alternative rounding method then it should be considered and allowed if it produces a fair and reasonable result.

Hi DK,

The VAT return needs to be as accurate as possible and boxes 1 and 6 would need to tally and so I would recommend using the method which brings about about the most accurate result.

Thank you.