Let’s say you sell services or goods in the UK or import them from other countries before selling them then calculating net VAT is essential to know your actual costs. This vat amount represents the exact vat paid or collected on the actual product or service and definately will need to be shown separately in your vat invoice as well as your vat returns.
Several eu countries including Germany, Italy, France, Poland, Sweden, etc have shifted over to vat or vat as being a system of taxing products and services in a bid to prevent multiple taxation on products or services. Vat also prevents tax evasion to a great extent compared to earlier systems. However, if you’re a trader or manufacturer that buys and sells goods under the vat system you then should certainly know about the tax component in your final costing of your goods and services.
It’s thus imperative that you calculate the net vat on each product or service so that you arrive at accurate costs and also calculate your profits correctly. Each eu state or country has different vat rate slabs that attract different percentages of vat. For instance, in case your organization is vatcheck.com/vat situated in the United Kingdom then you could be governed by a standard vat rate of 17.5% that may change to 20% after January 4, 2011. There’s also a reduced vat rate of 5% on certain goods and services while some goods or services are generally vat exempt or attract zero vat. The hmrc vat department or hm revenue and customs department has provided for 14,000 classifications that could ultimately decide on the actual vat amount on each service or product.
In case you have sold an item for ?100 excluding vat then you will need to add 17.5% vat provided the product attracts the standard vat rate. Your net vat rate will now be ?17.50 while your gross amount including vat will be ?117.50. The net rate of vat will have to be specified in your vat invoice along with your vat returns too. However, in order to charge and collect vat you’ll have to get a own unique vat number that will need to be displayed 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 can also claim the exact amount of vat paid on imported goods or services should they have been recently paid in the country of origin. You should use the assistance of a qualified vat, customs and excise duties agent or consultant who has complete knowledge of uk vat and eu vat rules, particularly when you import goods and services from member eu countries that follow the system of vat. Although vat rates might differ in each country, the net vat rate will be in accordance with the actual percentage of vat on a product or service.
It is crucial to know about each factor that contributes towards the price of your products or services. This will enable you to generate the maximum level of profits and also keep a strict eye on indirect and direct expenses that affect your business. Calculating net vat is definitely essential to understand your actual costs so that you can sell your product or service and services at optimum prices.