Professional Practice Architecture Test 2026 – Complete Exam Prep

The first step in calculating VAT (Value Added Tax) from a total cost that includes VAT is to divide the total cost by 1.12. This method is used when you want to isolate the VAT portion from the total amount that includes VAT.

When a price is inclusive of VAT at a rate of 12%, the total is effectively 112% of the VATable amount. Therefore, to find the original amount before VAT was applied, dividing the total cost by 1.12 gives you the base amount (the VAT exclusive price).

After obtaining this base amount, you can then calculate the VAT component by multiplying the base amount by 0.12 (which represents the 12% VAT). So, starting with the division by 1.12 is the essential first step to correctly identifying each component of the cost structure.