If you sell goods or services in the UK or import them from other countries before selling them then calculating net VAT is essential to understand your actual costs. This vat amount represents the actual vat paid or collected on the actual product or service and will have to be shown separately with your vat invoice as well as your vat returns.
Several eu countries including Germany, Italy, France, Poland, Sweden, etc have shifted to vat or value added tax as being a system of taxing products and services in a bid to prevent multiple taxation on products or services. Vat also vat validation prevents tax evasion to a great extent compared to earlier systems. However, if you are a trader or manufacturer that buys and sells goods within the vat system you then should certainly know about the tax component in your final costing of your products or services.
It is thus imperative that you calculate the net vat on each product or service so that you arrive at accurate costs as well as calculate your profits correctly. Each eu state or country has different vat rate slabs that attract different percentages of vat. For example, in case your business is situated in the United Kingdom then you might be subject to a regular vat rate of 17.5% that will switch to 20% after January 4, 2011. There’s also a reduced vat rate of 5% on certain goods and services while many services or goods are either vat exempt or attract zero vat. The hmrc vat department or hm revenue and customs department has provided for 14,000 classifications that will ultimately decide on the actual vat amount on each product or service.
If you have sold an item for ?100 excluding vat then you’ll need to add 17.5% vat provided the item attracts the standard vat rate. Your net vat rate will be ?17.50 while your gross amount including vat will likely be ?117.50. The net rate of vat will have to be specified by your vat invoice along with your vat returns too. However, in order to charge and collect vat you will have to get a own unique vat number which will need to be shown on each vat document. It is possible to turn into a vat registered trader by filling in an appropriate application vat form after your taxable sales have touched ?70,000 during the past 12 months.
You may also claim the exact amount of vat paid on imported services or goods should they have been recently paid in the nation of origin. You should utilize the services of a qualified vat, customs and excise duties agent or consultant who has complete understanding of uk vat and eu vat rules, especially when you import products or services from member eu countries that follow the system of vat. Although vat rates might differ in each country, the net vat rate will always be in accordance with the actual percentage of vat on a products or services.
It is crucial to know about each component that contributes towards cost of your products or services. This will enable you to generate the maximum amount of profits and also keep a strict eye on indirect and direct expenses affecting your business. Calculating net vat is indeed very important to understand your actual costs so that you can sell your product or service and services at optimum prices.