If you sell services or goods in the United Kingdom 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 over the actual product or service and will have to be shown separately in your vat invoice as well as your vat returns vat check.
Several eu countries including Germany, Italy, France, Poland, Sweden, etc have shifted to vat or vat as being a system of taxing services and products in a bid to prevent multiple taxation on goods and 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 within the vat system you then should know of the tax component in your final costing of the products or services.
It’s thus imperative that you calculate the net vat on each product or service so that you will 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, if your business is situated in the United Kingdom then you might be governed by a standard vat rate of 17.5% that will switch to 20% after January 4, 2011. There is also a reduced vat rate of 5% on certain goods and services while many goods or services 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 determine the actual vat amount on each product or service.
In case you have sold an item for ?100 excluding vat then you’ll 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 likely be ?117.50. The net rate of vat will need to be specified by your vat invoice as well as your vat returns too. However, in order to charge and collect vat you will have to get your own unique vat number which will need to be displayed on each vat document. You can turn into a vat registered trader by filling in the proper application vat form after your taxable sales have touched ?70,000 in the past 12 months.
You can also claim the exact amount of vat paid on imported goods or services if 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 that 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 be in accordance with the actual percentage of vat on a product or service vies.
It is crucial to know about each component that contributes towards price of your product or service. This may allow you to earn the maximum level of profits as well as keep a strict eye on indirect and direct expenses that affect your enterprise. Calculating net vat is indeed essential to understand your actual costs to be able to sell your product or service and services at optimum prices.