How Do I Calculate VAT Backwards?

By Staff WriterLast Updated Apr 7, 2020 3:03:10 PM ET

The Value Added Tax can be calculated from the total cost of an item by multiplying the total cost by the VAT fraction, according to HM Revenue & Customs. In the reverse, the formula to calculate the VAT of an item when only given the base price and the VAT rate is the base price times the percentage rate of the VAT.

The VAT fraction used to calculate VAT based on the total price of an item, what is known as a VAT-inclusive price, is found by dividing the rate of VAT by 100 plus the rate of VAT, as explained by the Leicester City Council. For example, if the VAT rate is 5 percent, the formula for the VAT fraction is 5/(100 + 5) = 5/105 = 1/21. Using the VAT fraction, the formula for finding the VAT on a VAT-inclusive price with a VAT rate of 5 percent is the total price x 1/21. If the total price is £105 and the VAT rate is 5 percent, the VAT is calculated by the formula £105 x (1/21) = £5, according to HM Revenue & Customs. The VAT of a VAT-inclusive price can also be found by dividing the total price by 1 plus the percent to find the base price, and then subtracting to determine the VAT.