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 on the actual product or service and definately will have to be shown separately in your vat invoice together with your vat returns vat validation.
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 great extent as compared to earlier systems. However, if you are a trader or manufacturer that buys and sells goods within 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 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 could be governed by 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 could ultimately decide on the exact vat amount on each service or product.
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, in order to charge and collect vat you’ll have to get your own unique vat number which will need to be shown on each vat document. It is possible to turn into a vat registered trader by filling in the proper application vat form after your taxable sales have touched ?70,000 during the past 12 months.
You can 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 utilize the assistance 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 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 be in accordance with the actual percentage of vat on the product or service vat number.
It is very important to understand each factor that contributes towards price of your products or services. This may enable you to generate the maximum level of profits and also keep a strict eye on indirect and direct expenses that affect your enterprise. Calculating net vat is definitely essential to understand your actual costs so that you can sell your product or service and services at optimum prices.