What is VAT in Productchimp?

In the UK, VAT is charged at 20% on net (VAT-exclusive) prices. That means:

• The net price is the base price before VAT
• The gross price is what customers pay (net + 20% VAT)

Productchimp uses this principle to break down your profit and VAT obligations accurately.

Key VAT Components in Productchimp

Inside the Profit Calculator, you’ll see several VAT-related values:

1. VAT on Sale

• This is the VAT portion included in your selling price.
• Calculated from the VAT-exclusive sale price.

2. VAT on Cost

• This is the VAT you paid when purchasing the product.
• You can typically reclaim this amount (input VAT).

3. VAT on Fees

• VAT charged by Amazon on their fees (e.g., referral, FBA fees).
• Also typically reclaimable.

4. VAT Due

Productchimp calculates VAT due using the formula:

VAT Due = VAT on Sale − VAT on Cost − VAT on Fees

This reflects what you owe to HMRC after reclaiming allowable VAT.

Example Calculation

Let’s walk through a simplified version based on the calculator:

Inputs:

• Cost Price: £6
• Sale Price: £22 (gross)
• VAT Rate: 20%

Step 1: Extract Net Prices

• Net Sale Price = £22 ÷ 1.20 = £18.33
• VAT on Sale = £22 − £18.33 = £3.67
• Net Cost Price = £6 ÷ 1.20 = £5.00
• VAT on Cost = £6 − £5.00 = £1.00

Step 2: VAT on Fees

• Amazon Fees VAT (from calculator): £1.30

Step 3: VAT Due

• VAT Due = £3.67 − £1.00 − £1.30
• VAT Due = £1.37

This matches the figures shown in Productchimp.

Important Notes

• VAT is always derived from net values, not gross.
• Productchimp automatically separates VAT from prices you input.
• Amazon fees VAT is treated as reclaimable, reducing your VAT liability.
• Always confirm your VAT obligations with a tax professional.

FAQs

Why does Productchimp subtract VAT on Fees?

Because VAT on Amazon fees is considered input VAT, which you can reclaim, reducing your total VAT payable.

Do I always reclaim VAT on Cost?

Only if:

• You’re VAT registered
• The supplier charged VAT properly

If not, you may not be able to reclaim it.

Why is VAT calculated from net prices?

UK VAT rules apply the 20% rate to VAT-exclusive (net) prices. Gross prices already include VAT.

What happens if my sale price is VAT-exclusive?

Productchimp assumes standard VAT-inclusive pricing for UK calculations. If you're working with VAT-exclusive prices, adjust your inputs accordingly.

Does this apply outside the UK?

No. VAT rules vary by country. This guide is specific to UK VAT (20%).

Can VAT ever be negative?

Yes. If your input VAT (costs + fees) exceeds VAT on sales, your VAT due may be negative, meaning a potential refund.

⚠️ Disclaimer: This information is for guidance only and does not constitute tax advice. Please consult a qualified tax professional to fully understand how VAT applies to your situation.