Why is there a difference in the amount of VAT and Total on an invoice?
The difference is due to the VAT being calculated at the transaction line level, this allows transactions to be split into the correct nominal postings and to be posted to the accounts system which is compliant with HMRC guidelines.
What does this mean?
VAT (Value Added Tax) is being calculated on each individual item or line in a transaction, rather than on the total amount at the end.
Why it matters:
When VAT is done per line, it helps split things correctly into different nominal codes (these are like categories/accounts in the accounting system).
This method ensures that the financial data goes into the right places in your accounting software.
It's also compliant with HMRC (UK tax authority) rules, which is important for staying legal and accurate.
The confusion:
If someone adds up the prices and then calculates VAT on that total, they might get a slightly different amount due to rounding.
This doesn’t mean it’s wrong—both methods are valid—but line-by-line is more precise and matches how the system posts data.
Why your company does it this way:
Your accounting setup requires transactions to be laid out per line for proper nominal posting, so VAT is calculated accordingly.