A VAT-registered business sells goods for £1,440 including VAT at the standard rate of 20%. How much VAT is included in the price?
Answer and explanation
Correct answer: D. £240
- Step 1: The VAT-inclusive price is 120% of the net price.
- Step 2: VAT = £1,440 × 20/120 = £240.
Answer
£240.
Why not the others: £288 is 20% of the VAT-inclusive price, not of the net price. £144 is 10% of the price. £1,200 is the net price, not the VAT.
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