If you sell services or goods 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 product or service and definately will have to be shown separately with your vat invoice as well as your vat returns vat validation.
Several eu countries including Germany, Italy, France, Poland, Sweden, etc have shifted to vat or value added tax as 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 under the vat system you then should certainly know about the tax component within your final costing of the goods and 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 example, if your business is located in the United Kingdom then you might be governed by 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 some services or goods 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 service or product.
In case you have sold an item for ?100 excluding vat then you will have 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 be ?117.50. The net rate of vat will need to be specified by your vat invoice along with your vat returns too. However, in order to charge and collect vat you will have to get a own unique vat number that will have 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 in the past Twelve months.
You can also claim the exact amount of vat paid on imported goods or services should they have been recently paid in the country 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 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 products or services vat registration.
It is very important to understand each factor that contributes towards price of your products or services. This will enable you to generate the maximum amount of profits as well as keep a strict eye on indirect and direct expenses that affect 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.