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We have an ecommerce system in place. The sales actually go through Sage, so we have an export script from our system that uses a third-party Sage Importer program. With a new version of this importer, values are checked more thoroughly. We are getting 1 pence discrepancies because of the way rounding works - our system has always held prices and worked to 4 decimal places. In the checkout the totals would be worked out first, then the rounding to 2 decimal places. The importer does rounding first, though. So, for instance:

Our way:

Product 1: £13.4561
Qty: 2
Total inc VAT = £32.29 (to 2dp)

Importer way:

Our way:
Product 1: £13.4561
Qty: 2
Total inc VAT = £32.30 (to 2dp)

Management are reluctant to lose the 4dp but the developers of the Sage importer have said that this is correct and makes sense -- you woudn't sell a product for £13.4561 in a shop, nor would you charge someone tax at 4 decimal places.

I contacted the HMRC and the operator didn't really give me much to go on, telling me a technician would phone back, to which they haven't and I'm still waiting after almost a week and numerous follow-up calls. I did find a PDF on the HMRC's web site, but this did about us much to confuse me as it did to answer my questions. I see that they're happy for people to round up or down, as long it is consistent, but I can't tell whether it should be done on a line by line basis or on the end total of the order.

We are now in the position where we need to decide whether it's worth us doing one of the following, or something completely different. Please advise with any experience or information I can read.

  • Change all products on the site to use 2dp
  • Keep 4dp but round each line in the order to 2dp before working out tax
  • Keep it as it is and "fudge" the values at the export script (i.e. make that values correct by adding or subtracting 1p and changing the shipping cost to make the totals still work out)

Any thoughts?

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I'm not sure what ecommerce solution you're using but isn't there a fourth option: round the product prices to 2dp before doing the tax calculation? That way the result matches but you still have your 4dp product prices. –  Tim Fountain May 28 '13 at 15:33
    
What eCommerce platform are you using? –  zigojacko May 28 '13 at 15:58
    
It's a bespoke system that I inherited when I took over with our team. Yes, rounding to 4dp would be an option. What I want to know really is - what do the HMRC expect/want me to do? –  Leonard Challis May 28 '13 at 18:48
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They want you to charge vat on the price you charged the customer. Prices are paid in whole pence. Adding decimal places does not make it more accurate if it is not what you charged the customer. –  JamesRyan May 29 '13 at 9:14
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1 Answer 1

Faced with the same issue with importing the orders into Sage. We have a client selling products ex. VAT (For example 2.44*1.2 = 2.928). Obviously we cannot show the customer a value to 3 decimal points. I makes sense to set the VAT to a value like 0.49 (2.93 - 2.44 = 0.49) rather than 0.488.

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