EDF VAT < 0.5p being rounded up

Mehuge

I’ve had an issue with my last two bills from EDF.

In both cases the VAT was rounded up when I believe and EDF acknowledged it should have been rounded down.

For example on one bill the VAT worked out at £6.5445 which should be rounded to £6.54 but EDF rounded it up it £6.55.

They acknowledged the problem with the first bill and offered compensation and vowed to get the problem with their billing resolved.

Next months bill came and a same thing. Had one support person claim that the way rounding works is that the £6.5445 is first rounded to £6.545 then to £6.55 but they isn’t how rounding works particularly for VAT where the rounding rules state that anything below 0.5p is discarded, ie rounded down meaning that 0.45p the pence fraction of £6.5445 is dropped leaving £6.54.

It might seem petty but if EDF are doing the this on everyone’s bill that is quite a lot of money they are making by rounding up when they shouldn’t be.

I presume it is also illegal.

Peter999_2

EDF won't make a penny.   Whatever they charge for VAT they have to pay to the government.

Devongardener

If they declare the higher value in their VAT returns, EDF won’t be making any money but it depends how their accounting software calculates it and they could well report the rounded down figure, giving them more profit.

[Deleted User]

Mehuge said:

Next months bill came and a same thing. Had one support person claim that the way rounding works is that the £6.5445 is first rounded to £6.545 then to £6.55 but they isn’t how rounding works particularly for VAT where the rounding rules state that anything below 0.5p is discarded, ie rounded down meaning that 0.45p the pence fraction of £6.5445 is dropped leaving £6.54.

Where have you got that from?  Have you misunderstood the following rule (from VATREC12030 - Rounding on invoices and rounding at retailers:)?

• 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.

£6.5445 is more than 0.5 of one penny.

mmmmikey

Deleted_User said:

Where have you got that from?  Have you misunderstood the following rule (from VATREC12030 - Rounding on invoices and rounding at retailers:)?

• 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.

£6.5445 is more than 0.5 of one penny.

Gosh, so it's even worse than we thought! This outrageous scandal is happening right across the country! I don't believe it - I'm going to report it to the chairman of the local Victor Meldrew society!

I mean, think about it. If, you do the maths, and like me you're on monthly billing that 0.5p per month could be 6p across a year - and not just one year, every single year. And for dual fuel customers it could be twice that of course, that's 12p per year. YES YOU HEARD THAT RIGHT THAT'S 12p EVERY SINGLE YEAR. It's no wonder our bills are so f*"!!!!g expensive. Those greedy, garlic smelling French EDF scum with their wholly inadequate billing system should be shot I tell you - shot.

Just as well we left the EU. And another example of the Guardian reading, tofu eating wokerati driving forward their anti-growth coalition. I have 3 priorities - growth, growth, growth. Bring back Boris.

We cannot allow this to happen, we must rise up and revolt. Powercuts to the People!

pochase

That does not really fit the additional comment in the regulation 

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.

If you check above EU Council Regulation you will find

Monetary amounts to be paid or accounted for when a rounding takes place after a conversion into the euro unit pursuant to Article 4 shall be rounded up or down to the nearest cent. Monetary amounts to be paid or accounted for which are converted into a national currency unit shall be rounded up or down to the nearest sub-unit or in the absence of a subunit to the nearest unit, or according to national law or practice to a multiple or fraction of the sub-unit or unit of the national currency unit. If the application of the conversion rate gives a result which is exactly half-way, the sum shall be rounded up

That would imply that normal rounding rules apply. 

It does not make any sense that to have a regulation where you always round up, how often will there be a VAT amount of less than one penny?

Problem seems to be more 

However, if a trader proposes an alternative rounding method then it should be considered and allowed if it produces a fair and reasonable result.

Accounting software like Sage seems to be using "unlogic" rounding for VAT when you google for VAT rounding you will see that the issue of rounding up and down problems is found a lot.

One of the reasons is for example that calculating the VAT for the seems often to happen on the line items, so there can be a difference between the VAT calculated for the total and adding up the sub totals.

[Deleted User]

pochase said:

One of the reasons is for example that calculating the VAT for the seems often to happen on the line items, so there can be a difference between the VAT calculated for the total and adding up the sub totals.

There's some additional bits about that in an additional HMRC note:

"If you calculate VAT at line level or invoice level, you must not round the VAT figure down.  But, you may round (up and down) each VAT calculation."

pochase said:

It does not make any sense that to have a regulation where you always round up, how often will there be a VAT amount of less than one penny?

If you're a government with chronic panic about not being paid your tax, always rounding up would make sense.

You're right, various different bits of the tax rules disagree with each other, and none of them seem sensible, but when did you see a tax system that was?

There's an even stranger system often found in the USA, that gets called either 'breaking even' or 'banker's rounding' - where which direction you round depends on what is before the decimal place.  12.5p would round to 12p but 13.5p would round to 14p

Things like SAGE have at least five different options for tax rounding depending on the local regulations - only one of which we would consider 'normal'.

Tax rounding is strange - if you are due to pay £6.5445 VAT and you only pay £6.54, have you underpaid your tax liability?

pochase

Even more interesting

• If the VAT on any transaction comes to less than 0.5 of one penny, it should be rounded down.

If it is the way you read it should it not say "the VAT is 0"?

Rounding down will always end up with 0.

[Deleted User]

Could be - and things like this are why I became an engineer and not an accountant.

inspectorperez

I remember as a trainee auditor when dinosaurs roamed the earth, that one clever computer programmer (the days when a computer room was equivalent to a mini supermarket in size) with a clever little wheeze, diverted all rounding differences to a phoney supplier account coded ZZZZZ1 or something similar, and cleared off with a tidy sum for his troubles.

As earlier poster pointed out, EDF won't make a penny out of this as it will all end up in government coffers.

QrizB

inspectorperez said:

I remember as a trainee auditor when dinosaurs roamed the earth, that one clever computer programmer (the days when a computer room was equivalent to a mini supermarket in size) with a clever little wheeze, diverted all rounding differences to a phoney supplier account coded ZZZZZ1 or something similar, and cleared off with a tidy sum for his troubles.

Wasn't that was (part of) the plot of Superman III? Richard Pryor's character did the rounding.