Value Added Tax (VAT) is a sales tax in the United Kingdom. A VAT fraction can be used to calculate how much VAT is included in a total sales price.
Types
VAT is added to taxable goods and services at the time of sale. A VAT-exclusive price is the price of an item before VAT is added. A VAT-inclusive price is the total sales price of an item, including VAT.
Significance
If you want to figure out how much VAT you have paid on an item, or if you want to claim back the VAT you paid on an item, then you must figure out how much VAT you paid. The VAT fraction is one way to calculate the VAT paid.
VAT Fraction
In order to calculate the VAT paid, multiply the price of the item by the VAT fraction. The VAT fraction for the standard rate of VAT (17.5 per cent as of August 2010) is 7/47. For example, the VAT paid on an item costing £117.50 is £117.50 x (7/47) = £17.50.