Imagine an online basket with 2 items in it, each with different VAT rates. A fixed amount coupon is then applied to the basket. How should the net/tax for this basket be accounted for?


║              ║ Rate ║ Gross ║  Net   ║  Tax  ║
║ Spoon        ║ 20%  ║ £10   ║ £8.33  ║ £1.67 ║
║ Carrycot     ║ 5%   ║ £10   ║ £9.52  ║ £0.48 ║
║ Total so far ║      ║ £20   ║ £17.85 ║ £2.15 ║
║ £5 Discount  ║      ║ £5    ║ ???    ║ ???   ║
║ Total        ║      ║ £15   ║ ???    ║ ???   ║
  • Welcome Votemike. As worded this question is off topic. Coupons are not applied to taxes but to total amount. – Dheer Dec 3 '16 at 12:19
  • @Dheer What are you referring to when you say 'total amount'? When the tax man came to claim the VAT for this off of me.... How much would I have to give him? And how would I work it out? – Votemike Dec 3 '16 at 12:51
  • You need to pay govt full 5 EUR. You can't apply voucher to select items. You can discount a item and pay less tax but that is different. You need a lawyer and tax consultant – Dheer Dec 3 '16 at 17:52
  • Your arithmetic is a bit off here. If an item costs GBP10 "gross" with a 20%VAT rate, then the "net" would not be GBP8. The correct net would be GBP8.33 since 8.33+20% = 10. And similarly with the other items. – Nick R Dec 3 '16 at 18:11
  • @NickR you are correct. I was doing this late last night. – Votemike Dec 4 '16 at 20:10

The vendor needs to do this using apportionment, according to the VAT rules for mixed supplies:

If you make mixed supplies and the individual supplies are not liable to VAT at the same rate then you need to work out the tax value of each supply in order to calculate how much tax is due. If the tax value is based on the total price you charge (see paragraph 7.3) you do this by splitting that price between the supplies. This is called an apportionment


There is no special method of apportionment ... However, your calculations must be fair and you must be able to justify them. It is usually best to use one of the methods shown in section 32.

The section 32 referred to really relates to apportioning use between business and non-business purposes, but it implies that splitting up the total price in proportion to the original prices would probably be fair. So in your example the vendor might split the £5 discount equally between the spoon and the carrycot as they had the same gross cost, and pay VAT as if each had cost £7.50 gross. The vendor could also do it in proportion to their net (pre-VAT) prices and thus apportion a bit more of the discount to the carrycot than the spoon, but as this would lead to them paying slightly more tax overall they probably wouldn't choose to.

However, none of this is likely to be too relevant to a consumer, since in the UK prices must be presented as the gross (VAT-inclusive) amounts and so the discounts will also apply to those amounts. It will of course affect how much of the purchase price the vendor ends up paying on to the government and thus might indirectly affect what discounts the vendor is willing to offer.

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