[Math] difference between discount and VAT calculations

percentages

When I remove VAT I divide by 1.x
e.g. VAT @ 20%
£1 /1.2 =£0.83

But if want to remove a % discount do I use the same method as above, or the method below?
20% £1 * 20/100 = £0.20
£1 – £0.20 = £0.80

Best Answer

Consider the following situation. You have an item that costs 100\$ before VAT. Let's imagine the VAT is 20%. Then the list price will be $100\$\cdot 1.20 = 120\$$. Then that item is put on a 20% sale. The sticker price will then be $120\$ \cdot 0.80 = 96\$$. The difference is that the VAT is added while the discount is subtracted.

To emphasize, the VAT is added to a base price while discount is substracted from the total price.

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