How Do I Work Out VAT Content?
VAT, formally known as Value Added Tax, is a type of tax that is levied on all goods and services produces in a country. For example, the UK's VAT rate was increased from 15 to 17.5 percent in 2010, and will rise to 20 percent starting on Jan. 4, 2011. VAT in most countries varies from 10 to 25 percent.
The VAT content of a product refers to how much taxes are levied on a sale of a product. Retail prices normally include VAT while wholesale prices do not.
You may want to calculate VAT content of a product to know the amount of money that goes to the government coffers from the sale of a product. You may also be interested in the VAT if you are a wholesale buyer and would like to know how much tax you will need to pay.
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Instructions
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Read the price of a product. Let's assume that the product costs £10.
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Look up the VAT rate for this product. Usually VAT is uniform across all products, though there are notable exceptions. Food, cultural events, works of art, charitable events, and education are VAT-exempt in many countries. The VAT rates for different products can be checked at the tax collector's office. In the UK, it is Her Majesty's Revenue & Customs.
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Multiply the value of the product by the VAT rate (measured in percentages), then divide by 100.
For example, if the value of the product is £10, and the VAT rate is 17.5%, then the VAT content will be:
£10 * 17.5 / 100 = £1.75
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References
- Photo Credit food image by brijesh gurnani from Fotolia.com
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Comments
View all 7 Comments-
Stupid eHow contributor got the calculation WRONG! And he's got a degree in economics? LOL
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smart arse! lol, the accountant said it was divide by 6 multiply by 5! what you have just said makes sense, well done, I will use that formula. That's very good, thanks.
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that's OK but I am trying to get the vat out of figures like £2456.78, I have given up now and past it to my accountant, hopefully he will know the winning formula, thanks anyway you have all been very helpful. x
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that's great, that works, but how do you find out what the VAT is? When it was 17.5% you x7 divide by 47 = 17.5% VAT, but what is it for 20%? I don't think anyone knows!
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doh! I have given up for the night, drove me mad! I did the divide by 1.2 but if you try it against a receipt so you know what the VAT is it doesn't work out? If you take the gross total divide by 1.2 that should give you the net total, take that away from the original figure to leave the 20% vat, but if you check against your til receipt you will see its not right? You would think 20% would be easier than 17.5, but I can't work it out, where's Mr Webb when you need him, lol
