We understand that in the UK, the majority of products and services purchased and sold are inclusive of VAT As such, Ivy has introduced a new inclusive/exclusive tax feature to meet the needs of our UK designers, ensuring that items bought and sold are done so with the necessary tax settings taken into account.
How does the new inclusive/exclusive tax setting work? It starts with your account settings and profile preferences. Access your account settings by clicking on the initials listed in the top right-hand corner of your account, and click on “My Account.” Next, click on the Sales Tax tab.
Here, you have an opportunity to select default tax settings for your account-wide products and services, including:
- Are your products/services default taxable?
- Are the costs default inclusive or exclusive of VAT?
- What is the default rate to associate with your taxable products/services?
By default, all of these settings are turned on, meaning, all products and services are default taxable, and default inclusive of tax at the standard and reduced rates, respectively.
How to set your costs for products and services to be inclusive of tax:
In order to understand how to indicate that products/services added to your Ivy account are inclusive of tax, it’s important to know how to add products and services to your Ivy account.
From the Ivy Clipper:
IF your account settings indicate that all account products are by default inclusive of tax, any product that you clip using the Ivy clipper will assume cost added is inclusive of VAT.
From the product library:
Upon entering a product in the product library, according to your account settings, the product cost will indicate that it is inclusive of tax, indicated by the checked “Inclusive”box. When an item’s inclusive tax cost is entered, you will see the exclusive unit cost listed below. Ivy calculates the exclusive unit cost of the item based on the VAT rate you have selected upon entering the item to your library. By default, the rate from your account settings is selected.
While adding a product to your library, you can choose to override your default account tax settings and indicate that the item does not include VAT by unchecking the “Inclusive” box, and you may also change the tax rate associated with the item by selecting a different amount in the dropdown menu.
Upon adding an item inclusive of VAT to your product library, you will notice that the cost listed is exclusive of VAT. Simply hover over the t icon next to the cost, and you'll see the breakdown of the unit cost and VAT, which equals the total cost of the item:
The same principle applies to services added to your products/services library. Any service added will show your inclusive cost broken down to the exclusive unit cost, and you have the ability to override default settings by indicating whether the item is inclusive/exclusive of tax, and at which rate:
Here's what it looks like in your services library once saved:
***Please keep in mind that the default settings will only affect new products and services. Meaning, any products or services you had before this release will not include the VAT automatically.
How does this appear to your client on your client-facing documents?
Any inclusive product/service added to your document will be shown with its exclusive cost on the line item. This is because Ivy calculates and shows VAT as a total per document, rather than per line item. See below:
However, you can see the tax indicated at the bottom summary of the document:
Your client will explicitly see the cost exclusive of tax on their views:
In the Project Tracker, you will see the same indication for cost exclusive of VAT:
Why are items in my Product Library being listed with 0% VAT?
Items added to your library as exclusive of VAT will not show a VAT amount on the item in the product library. VAT will only be added on a document level, at which point you can select the VAT rate to associate with the item:
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