Reverse VAT Calculator – Calculation Formula

VAT Calculator is a tool that calculates the Value Added Tax (VAT) for transactions. It helps you calculate, Reverse VAT, VAT-inclusive, or exclusive, based on specified fields.

What is Reverse VAT?

Reverse VAT, also known as reverse charge mechanism. It is a tax process that shifts the responsibility for VAT payment from the supplier to the buyer. Through this mechanism, the buyer keeps track of both input and output VAT, thereby reducing fraudulent activities by suppliers.

Normally, businesses charge VAT on their supplies and claim the deduction on purchases. In the reverse charge mechanism, the supplier avoids charging VAT on the invoice, and the customer, in turn, pays and deducts the VAT through his VAT return.

The customer initially pays the net amount to the supplier, during VAT return, they calculate the reverse charge on the invoice as both input and output VAT. So, this has a neutral impact on the cash flows of both the customer and the supplier.

Example: If you are a Scotland businessman purchasing services with a total value of £1,000 from a Poland supplier, you will receive an invoice without VAT. Assuming that standard VAT rates apply, you would calculate the VAT amount at 20% and report £2,00 as output VAT and then £2,00 as input VAT.

How to calculate Reverse VAT?

The formula to remove Value-Added Tax (Reverse VAT) is the following:

Net Amount: (Gross Amount / (1 + VAT Rate). Divide the amount by (1 + VAT Percentage)

Example: Net Price = £100 / (1 + 0.20) = £83.33, or £100 / 1.2 = £83.33

UK Reverse VAT Calculator

This calculator helps you to calculate Reverse VAT. So, for calculation, select “Remove VAT” as it is selected by default and you don’t need to do anything. It helps you to calculate reverse VAT on purchases of goods or services.

VAT Calculation Formula

The VAT calculation formulas for VAT amount, exclusive of VAT amounts, and inclusive of VAT amounts in the UK are as follows:

1: Total Amount (Including VAT): Total Amount = Net Amount + VAT Amount

Net Amount: The original amount before VAT.
VAT Amount: The amount of VAT to be added.

2: Net Amount (Exclusive of VAT): Net Amount = Total Amount / (1 + VAT Rate)

Total Amount: The amount that includes VAT.
VAT Rate: The applicable VAT rate as a decimal (0.20 for a 20% VAT rate).

3: VAT Amount: To calculate the VAT amount. You can use this formula:

VAT Amount = Total Amount – Net Amount or VAT Amount = Net Amount * VAT Rate.

What is a Reverse VAT Charge?

Reverse charge means you must have an account for VAT on services purchased from businesses based outside the UK. This also applies to Germany, France and other countries. You must register for VAT, otherwise, the reverse charge will not apply to you.

If you’re a traveller and buy some goods or services in the UK, you may have paid VAT on the goods or services. Now, you can also reclaim the VAT you paid in that quarter. So, this means you don’t have to pay anything extra.