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 service or product and definately will need to be shown separately in your vat invoice together with your vat returns check vat number.
Several eu countries including Germany, Italy, France, Poland, Sweden, etc have shifted to vat or value added tax as being a system of taxing services and products in a bid to avoid 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 then you should certainly know of the tax component within your final costing of your products or services.
It’s thus important to 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, if your business is situated in the United Kingdom then you might be governed by 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 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 determine the actual vat amount on each product or service.
In case you have sold a product for ?100 excluding vat then you will need to add 17.5% vat provided the item 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 have to be specified in your vat invoice along with your vat returns too. However, to be able to charge and collect vat you’ll have to get a own unique vat number that will have to be displayed on each vat document. It is possible to turn into a vat registered trader by filling out the proper application vat form after your taxable sales have touched ?70,000 during the past Twelve months.
You can also claim the actual amount of vat paid on imported goods or services should they have been recently paid in the country of origin. You should utilize the services of a qualified vat, customs and excise duties agent or consultant that has complete knowledge of uk vat and eu vat rules, particularly 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 based on the actual percentage of vat on a product or service search vat number.
It is very important to know about each factor that contributes towards cost of your product or service. This will allow you to generate the maximum level of profits and also keep a strict eye on direct and indirect expenses affecting your business. Calculating net vat is definitely very important to understand your actual costs to be able to sell your products and services at optimum prices.