UK VAT Calculator: Add, Remove & Reverse Charge
Value Added Tax (VAT) allows for simple calculations, but removing it or handling the "Reverse Charge" can be tricky. Use this tool to get accurate figures instantly.
How to Remove VAT from a Price (The Formula)
Many people make the mistake of calculating 20% of the total and subtracting it. This is wrong.
Because VAT is added on top of the net price, the gross price represents 120% of the original value. To return to the net price (100%), you must divide by 1.2.
Formula: Gross Price ÷ 1.2 = Net Price
Example: £120 ÷ 1.2 = £100 (Correct)
Example: £120 - 20% = £96 (Incorrect)
What is the Domestic Reverse Charge (DRC)?
If you work in the Construction Industry Scheme (CIS), you likely need to use the Reverse Charge mechanism. This means the customer pays the VAT directly to HMRC, rather than paying it to you.
When creating an invoice:
- State the Net amount clearly.
- Calculate the VAT amount (usually 20%) but do not add it to the total payable.
- Mark the invoice: "VAT Act 1994 Section 55A applies".
Adding VAT to an Invoice
To add VAT, simply multiply your Net figure by 0.20 (for Standard Rate) to find the tax amount, then add it to the original Net figure.