Business Tax

VAT exclusive price

Displayed price

VAT rate

Direction

Ex-VAT price 49.5

59.9 ÷ (1 + 21%)

VAT element 10.4

Displayed price 59.9

VAT fraction 21/121

Margin maths uses ex-VAT on both sides

The ex-VAT price is the displayed figure divided by one plus the rate. A 59.90 shelf price at 21% is 49.50 net with 10.40 of VAT. That net figure is what counts as revenue in your accounts.

How to find the ex-VAT price

1 Enter the price as displayed.

2 Enter the rate applied to that product.

3 Read the ex-VAT figure — that is your actual revenue.

4 Use it, not the gross, for any margin calculation.

Margin calculations must use ex-VAT figures on both sides, and this is the most common place people go wrong. Comparing a VAT-inclusive selling price against an ex-VAT cost inflates the apparent margin by the whole VAT rate, which can turn a 15% margin into an apparent 35%. VAT is not yours; it passes through the business to the tax authority. Stripping it out first is the discipline that keeps the numbers honest.

Questions

How do I find the price excluding VAT? −

Divide the displayed price by 1 plus the rate — by 1.21 at 21%, or 1.20 at 20%.

Which figure counts as revenue? +

Why does my margin look too good? +

Do I include VAT in turnover for the registration threshold? +

Is ex-VAT the same as net? +

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