Calculating the VAT (Value Added Tax) element of any transaction can be confusing at the best of times. Here are some simple steps that can help.
1. Take the gross amount of the item, whether a selling price or cost price (the gross amount would be the total you would pay which includes VAT) and divide it by 120, (where the VAT rate is 20.0% per cent.) If the rate is different, just add 100 to the VAT percentage rate and divide by that number.).
2. Multiply the result from Step 1 by 100 to get the item amount ex-VAT
3.Multiply the result from Step 1 by 20 to arrive at the VAT amount of the item.
Example:-
Item Selling for £2.40
1 Gross Amount including Vat £2.40 / 120 = £0.02
2 Net Amount excluding VAT £0.02 * 100 = £2.00
3 Vat Amount £0.02 * 20 = £0.40
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