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 understand 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 to vat or vat as a system of taxing services and products 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 are a trader or manufacturer that buys and sells goods under the vat system you then should know of the tax component within your final costing of the products or services.
It’s thus imperative that you calculate the net vat on each product or service so that you will 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, in case your organization is vatcheck.com/vat located in the UK then you could 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 generally vat exempt or attract zero vat. The hmrc vat department or hm revenue and customs department has provided for 14,000 classifications that could ultimately decide on the actual vat amount on each service or product.
In case you have sold a product for ?100 excluding vat then you will need to add 17.5% vat provided the product attracts the regular 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 have to be specified by your vat invoice as well as your vat returns too. However, to be able to charge and collect vat you’ll 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 may also claim the exact amount of vat paid on imported goods or services if they have been recently paid in the country of origin. You should use the services of a qualified vat, customs and excise duties agent or consultant who 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 in accordance with the actual percentage of vat on the product or service.
It is very important to know about each factor that contributes towards the cost of your products or services. This will allow you to earn the maximum level of profits and also keep a strict eye on direct and indirect expenses that affect your business. Calculating net vat is indeed essential to understand your actual costs to be able to sell your products and services at optimum prices.