If you sell goods or services 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 over the actual service or product and definately will need to be shown separately with your vat invoice together with your vat returns.
Several eu countries including Germany, Italy, France, Poland, Sweden, etc have shifted to vat or vat as a system of taxing products and services in a bid to prevent multiple taxation on goods and 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 under the vat system you then should certainly know about the tax component within 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 come to 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 instance, in case your business is vat check located in the UK then you might be subject to a regular vat rate of 17.5% that will change 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 service or product.
In case you have sold a product for ?100 excluding vat then you’ll have to add 17.5% vat provided the product 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 in your vat invoice as well as your vat returns too. However, to be able to charge and collect vat you will have to get your own unique vat number that 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 Twelve months.
You can also claim the exact amount of vat paid on imported goods or services should they have already been paid in the nation 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 always be based on the actual percentage of vat on the products or services.
It is crucial to understand each factor that contributes towards the cost of your products or services. This may allow 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 essential to know your actual costs to be able to sell your products and services at optimum prices.