If you sell services or goods in the United Kingdom or import them from other countries before selling them then calculating net VAT is very important to know your actual costs. This vat amount represents the actual vat paid or collected over the actual product or service and definately will have to be shown separately in your vat invoice together with your vat returns.
Several eu countries including Germany, Italy, France, Poland, Sweden, etc have shifted over to vat or value added tax as a system of taxing services and products in a bid to avoid vatcheck.com multiple taxation on goods and services. Vat also prevents tax evasion to a great extent compared to earlier systems. However, if you are a trader or manufacturer that buys and sells goods under the vat system you then should certainly know about 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 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 located in the UK then you might be subject to a regular 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 products or services while many 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 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’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 be ?117.50. The net rate of vat will need to be specified by your vat invoice along with your vat returns too. However, to be able to charge and collect vat you will have to get a own unique vat number that will have to be displayed on each vat document. You can turn into a vat registered trader by filling out an appropriate 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 services or goods 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, 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 based on the actual percentage of vat on a product or service.
It is crucial to understand each component that contributes towards price of your product or service. This may enable you to earn the maximum amount of profits and also keep a strict eye on indirect and direct expenses affecting your business. Calculating net vat is definitely very important to know your actual costs so that you can sell your products and services at optimum prices.