Magento VAT (tax) rates not working correctly on displayed prices: VAT is added even catalog prices are including tax

Question

I'm setting up a store and have already got prices on products. NOW I'm looking at the VAT issue and have set up tax details under Sales > Tax to apply a UK VAT rate of 20%.

The prices which have been entered in the product catalogue are all inclusive of VAT and so in System > Configuration > Sales > Tax I've set 'Catalog Prices -> Including Tax' and 'Display Product Prices In Catalog -> Including Tax'.

Despite 'Catalog Prices -> Including Tax' the system seems to believe that the price stored is exclusive of VAT so, for example, a product of £10.50 (inclusive) is showing as £10.50 PLUS VAT i.e. £12.60, although the catalogue entry price is showing as £10.50 GBP Inc.Tax

In fact, even if I say 'Catalog Prices -> Excluding Tax', it doesn't seem to make any difference.

It seems that no matter what I tell it, it thinks my catalogue prices are exclusive of VAT. Am I missing a setting somewhere?

Magento ver. 1.7.0.2

Tax setup details:-

Tax Class = Retail Customers (the only class)
Product Class = Taxable Goods (all products assigned to this)
Tax Zone = UK TAX = 20%
Tax Rule = Retail Customers / Taxable Goods / UK Tax

Answer 1

No shame at all in missing this setting - unless you knew about it you wouldn't think it would be related to the display of tax inclusive prices.

System -> Configuration -> Sales - Shipping settings - Origin

(if you are using the UK language pack replace Shipping Settings with Delivery Settings).