Originally Posted by pg600rr
That isnt what I said, I said they dont deduct 20% VAT, I was wondering why, if VAT was raised to 20%, they still deduct the old 17%.
Ok, I think I now understand what you are saying. For example, if a widget, including VAT, is selling for 100 pounds, you are thinking that the VAT should be 20 pounds (100 x 20%) and therefore you should pay 80 pounds for the widget. Am I correct on this?
However, this logic isn't correct. If a widget, inclusive of VAT, is selling for 100 pounds, the widget without VAT would be 83 pounds (100 / 1.2). Thus, you get your your 17% discount (100 minus 17 equals 83.) If you now calculate the price with the VAT it becomes 100 (83 x 1.2). There is some rounding, but I have ignored that.
The moral of the story is that you cannot multiple a price which is inclusive of VAT by 80% and expect to get the pre VAT price. You must divided the price inclusive of VAT by 1.2 to get the price without the VAT,