Fun with Ecommerce and VAT!

We are often approached by people looking to start a new business and in particular online shops or ecommerce.  One of the most common areas we are asked to explain is VAT and how this is calculated on their website.

Obviously some products are  VAT rated others are not, but one issue that crops up a lot is – ‘I know how to add VAT to a price (e.g. price is £100.00 – VAT is 20%  – simply multiply the price by 1.2), but what do I do when I want to retail a product at a certain price and want to work backwards so  to speak.  Intuitively a lot of people will say ‘ Simply take the £100.00 and deduct 20% – giving you £80.00′  So your price would be £80.00.

Calculating VAT made easy with the Scoosh VAT Calculator

If you are running an online shop, you will often have to enter your prices excluding VAT, but you will also want a “clean” price for your customers. Working out VAT is easy but working backwards can sometimes be a little more tricky as you can’t simply take 17.5% off the price and you don’t want to spend all day calculating prices.