How to factor in VAT?

catlovesmike

Hi guys,
Thanks for your help in advance! Im a newly set up sole trader providing kids party entertainment. Im trying to figure out how to factor in my vat rate to my customers price, while remaining competitive in my market. Do you simply add the 21% (for example) on top of the charge, or do you make the percentage inclusive of the cost you charge? Eg. is it say 100 euro PLUS 21% or is it 100 euro INCLUSIVE of 21%???? Please help!

NinjaTruncs

Aren't all prices to the end customer supposed to include VAT, unless the customer is in the trade. Or that is what i was told, so it would need to say 100 Inc VAT.

Your example is a little confusing, surely you mean 100 + VAT or 121 inc VAT

dbran

Hi

As you are selling to end users the VAT should be included in the price of the service as it is a cost to them.

So I guess that you should be charging whatever the price that allows you to make a reasonable return for your time PLUS the VAT at 21%.

If this final figure makes you uncompetitive then you may need to reduce the selling price. But in this case the net will have to be 1.21 of your final selling price ie your second method of calculation!!! In which case is the business still viable?

Hope this helps

dbran

drunkmonkey

When your dealing with consumers you give them the vat inclusive price. They do not need to worry about it as they can not reclaim it, only when dealing with a business would you quote the price excluding vat...


there's a vary handy calculator here http://www.crazysquirrel.com/finance/vat-calculator.jspx just substitute the pounds for euros..

edit:

if your providing service as in a dancing clown you'd only be charging vat at 13.5% if you had to supply balloons for the party you'd be charging 21% for them.

A_m_y

Most prices need to include VAT, if you're charging €100 plus 21.5% VAT your price will be €121.50 (Incl. vat) or if you want a total cost of €100 (incl VAT) your net price is €82.30 with 21.5% vat.

Hope that helps!

This website is great for figuring VAT prices out!

http://www.nolanassociates.com/Tools/Calculators/VAT_Tax_Calculator

catlovesmike

Hiya,
As it stands, you are correct, i know i have to charge vat and I know that the customer needs to see that. My main worry is remaining competitive and so in order to do so i will have to undercharge my service even more simply to factor in the Vat...i think....make sense yet?

catlovesmike

drunkmonkey wrote: »

When your dealing with consumers you give them the vat inclusive price. They do not need to worry about it as they can not reclaim it, only when dealing with a business would you quote the price excluding vat...


there's a vary handy calculator here http://www.crazysquirrel.com/finance/vat-calculator.jspx just substitute the pounds for euros..

edit:

if your providing service as in a dancing clown you'd only be charging vat at 13.5% if you had to supply balloons for the party you'd be charging 21% for them.

Hi,
Thanks for all your answers, i will check that site out. How do you know that about the entertainment? I play games, etc with the kids, thats what I do, and i wasnt able to find anything on the revenue website that told me which rate to charge? 13.5 was what i thought, but I couldnt find it!

LK1

catlovesmike wrote: »

Hi guys,
Thanks for your help in advance! Im a newly set up sole trader providing kids party entertainment. Im trying to figure out how to factor in my vat rate to my customers price, while remaining competitive in my market. Do you simply add the 21% (for example) on top of the charge, or do you make the percentage inclusive of the cost you charge? Eg. is it say 100 euro PLUS 21% or is it 100 euro INCLUSIVE of 21%???? Please help!

Hi

You mightn't understand VAT.It's basically a consumer tax collected by VAT registered traders on supplies of their goods/services. You collect it and pass it on to the Revenue commissioners.

So you pick your price and charge VAT on top of what your price is. It depends on your price.

If your charge is €82.65, including the VAT its €100
If your charge is €100, including the VAT its €121
and you pass the VAT element of whichever on to revenue.

This reveue commissioners guide for businesses might help
www.revenue.ie/en/tax/it/leaflets/it49.pdf

A_m_y

catlovesmike wrote: »

Hiya,
As it stands, you are correct, i know i have to charge vat and I know that the customer needs to see that. My main worry is remaining competitive and so in order to do so i will have to undercharge my service even more simply to factor in the Vat...i think....make sense yet?

Makes lotsa sense! I had the same problem when starting my own catering business.. trying to come up with a price that is good for you, the customer and the tax man!!

As far as I know, services are 13.5% and certain products vary...

This doc helped me figure it out http://www.revenue.ie/en/tax/vat/guide/vat-guide-ch16.pdf

Good luck!

DubTony

catlovesmike wrote: »

Hi,
Thanks for all your answers, i will check that site out. How do you know that about the entertainment? I play games, etc with the kids, thats what I do, and i wasnt able to find anything on the revenue website that told me which rate to charge? 13.5 was what i thought, but I couldnt find it!

When you're supplying a service, i.e. LABOUR, the VAT charge is 13.5%. The 21% rate is for most consumer goods.

Be aware that the customer does not need to know how much VAT they are paying. To highlight the VAT amount in any literature for an end user is actually illegal and when quoting prices on the phone you should simply quote the total price without ever mention the V word. This is obviously to hide the extortionate rate of tax that the consumer pays.

Another point. Unless you've done so already, you aren't required to register for VAT until your actual (or projected) turnover hits €35,000 per annum. (Not quite sure about that exact figure, buts it's very close). If you were charging €100 a go, you'd need to be doing over 300 of these a year to be required to register. I have a feeling that your average clown isn't charging vat.

If I were you I'd call revenue (vat office) and talk to them. They are very helpful.

catlovesmike

DubTony wrote: »

When you're supplying a service, i.e. LABOUR, the VAT charge is 13.5%. The 21% rate is for most consumer goods.

Be aware that the customer does not need to know how much VAT they are paying. While it's ok to volunteer the information to them, to highlight the VAT amount in any literature for an end user is actually illegal and when quoting prices on the phone you should simply quote the total price without ever mention the V word. This is obviously to hide the extortionate rate of tax that the consumer pays.

Another point. Unless you've done so already, you aren't required to register for VAT until your actual (or projected) turnover hits €35,000 per annum. (Not quite sure about that exact figure, buts it's very close). If you were charging €100 a go, you'd need to be doing over 300 of these a year to be required to register. I have a feeling that your average clown isn't charging vat.

If I were you I'd call revenue (vat office) and talk to them. They are very helpful.

Hi there,
thanks for that super informative reply it was really helpful! Oh and i'm not actually a clown, but i like that people think I could be! :-) I have already fired an email to revenue today asking to clarify my rates, and the reason i'm even asking about all this is to have the ability to claim back any vat expenses on what i purchase for the business, thats the only reason i'm considering registering at all!

DoMyBooks

Here is a very basic decision tree which may help you decide whether you should register for VAT or not. Its far from conclusive but it should give you an idea. If your dealing with the end consumer its normally best to leave off registering for VAT until you legally have to.

http://www.domybooks.ie/Blog/tax/do-i-have-to-register-for-vat-galway-accountant/

suey71

But start up costs can be higher if you dont reg for VAT in the beginning.

ie. you have to pay VAT on your supplies and services and cant claim it back.

Is this correct?

In any case, registering for VAT or not registering for VAT it doesnt matter profit wise. I've seen some calculations done by some of the guys here that proves that.

RollYerOwn

Have a question on these lines myself, and I think its all related to not really understanding about VAT, so any help appreciated..

I'm working out my costings for supplying services (sole trader), and as I would have to travel I have tried to factor in "Away" prices and "Local" prices - ie, if I have to stay away from home beyond a certain distance, I have to charge more to cover accomodation etc.

My "Away" prices then put me over the VAT threshold, forcing me to register for VAT and driving my prices too high to be competitive whether local or not.

This doesn't seem right to me. I suspect there might be a better way of charging for my incurred accommodation expenses rather than billing a client the higher rate (ie not counting the accommodation expenses as turnover) - but I'm losing my head trying to get information about this.

ghosttown

Interesting thread.... I charge my time out as a consultant, mainly to UK reg VAT companies, as a business representative in Ireland, so they are VAT free invoices. Have one or two small Irish companies i advise, have always invoiced them as a representation fee - at 21%. Should i be charging 13.5% as i am essentially invoicing them for expenses incurred and labour (mine) in seeing customers on their behalf ?

RollYerOwn

I don't understand why people are maintaining that the VAT rate for services is 13.5% either - the reference given above to the VAT guide reads (p116):

"All goods and services other than those specified as being exempt or liable at the zero or 13.5% rates
(see Appendices A to C and Appendix G in certain circumstances) are liable to VAT at the standard 21%
rate.The only exceptions are livestock, greyhounds and the hire of horses which are currently liable at
4.8%."

You'll have to search quite hard to work out whether what you do is an exempted activity or at the lower rate. The whole thing seems deliberately obfuscated to me - but I'm a bit of a thicky where this is concerned.

DoMyBooks

ghosttown wrote: »

Interesting thread.... I charge my time out as a consultant, mainly to UK reg VAT companies, as a business representative in Ireland, so they are VAT free invoices. Have one or two small Irish companies i advise, have always invoiced them as a representation fee - at 21%. Should i be charging 13.5% as i am essentially invoicing them for expenses incurred and labour (mine) in seeing customers on their behalf ?

What consultancy services are you providing ? Most consultancy services are billed at the standard rate (21%)

ghosttown

Am providing sales representation into multi-nationals, assisting in business development. i charge out a retainer / expenses / commissions, calculated monthly in arrears. thanks

DoMyBooks

You are correct charging 21% stick with it.

(thats my opinion not professional advice)

catlovesmike

Thanks for all the advice everyone, interestingly enough I emailed Revenue the same question and got a standard..."Charge ALL services at 21%" answer, which I KNOW is not right! Grrrrrr!