If you sell goods or services in the United Kingdom or import them from other countries before selling them then calculating net VAT is very important to understand your actual costs. This vat amount represents the exact vat paid or collected over the actual service or product and will need to be shown separately in your vat invoice as well as your vat vat check 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 prevents tax evasion to a degree compared to earlier systems. However, if you’re a trader or manufacturer that buys and sells goods within the vat system then you should know of the tax component in your final costing of your products or services.
It is thus important to calculate the net vat on each products or services 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 UK then you might be governed by a standard vat rate of 17.5% that may switch to 20% after January 4, 2011. There’s also a reduced vat rate of 5% on certain products or services while some services or goods 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 will ultimately decide on the actual vat amount on each product or service.
In case you have sold an item for ?100 excluding vat then you will need to add 17.5% vat provided the item attracts the regular 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 have to be specified in 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 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 goods or services if they have been recently paid in the nation of origin. You should use the services of a competent vat, customs and excise duties agent or consultant that has complete understanding 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 based on the actual percentage of vat on a product or service.
It is crucial to know about each factor that contributes towards price of your products or services. This will allow you to generate the maximum amount of profits as well as keep a strict eye on indirect and direct expenses affecting your business. Calculating net vat is indeed very important to know your actual costs so that you can sell your products and services at optimum prices.