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 understand your actual costs. This vat amount represents the exact vat paid or collected over the actual product or service and definately will need 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 value added tax as being 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 as compared to earlier systems. However, if you're a trader or manufacturer that buys and sells goods under the vat system then you should certainly know of the tax component in your final costing of your goods and services.
It's thus imperative that you calculate the net vat on each products or services 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 vat check situated in the UK then you might be subject to a standard vat rate of 17.5% that may switch 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 could ultimately decide on the exact vat amount on each product or service.
In case you have sold a product for ?100 excluding vat then you will need to add 17.5% vat provided the item 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 need to be specified in your vat invoice as well as 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 displayed on each vat document. You can turn into a vat registered trader by filling out the proper 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 should they have already been paid in the country of origin. You should utilize the services of a competent vat, customs and excise duties agent or consultant who has complete understanding of uk vat and eu vat rules, especially 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.
It is very important to understand each component that contributes towards cost of your products or services. This may allow you to generate the maximum amount of profits and also keep a strict eye on direct and indirect expenses that affect your business. Calculating net vat is indeed essential to know your actual costs so that you can sell your product or service and services at optimum prices.