Why a 2.13% discount and not 2.5%?
A perfectly reasonable question, with a slightly complicated answer, so we'll do our best to explain.
The previous VAT rate was 17.5%
The new VAT rate, from Monday 1st December 2008 is 15%.
As an example this means:
- A product selling for £10 has a price excluding VAT @ 17.5% of £8.51
- If you apply the new VAT rate of 15% to the price excluding VAT (£8.51), it gives the new price of £9.79
- The new VAT rate equates to a saving of £0.21 (£10 - £9.79 = £0.21)
- This equals the same as taking 2.13% (or 21p) off the original £10 price
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