Accurate vat calculation will help you calculate exact vat rates
When you start issuing vat invoices to your clients then accurate vat calculation will help you calculate exact vat rates. Calculating vat rates is quite easy and you will have to display all your calculations within your vat invoices and your vat returns too.
If you are located in the UK then you would have turned into a VAT registered trader once your taxable sales would have reached the vat threshold figure of 70,000 pounds within the past Year. This would lead to issuance of vat invoices by you to all your future clients. Your vat invoice will have to mention your vat number along with vat rates alongside your services or goods that you have sold to your clients. In order to calculate vat you need to know the classification of your goods and services as decided by HM Revenue and Customs or hmrc vat department that manages all aspects of vat in the UK.
There are 14,000 vat classifications given by hmrc just in case you have trouble in slotting your products or services in the right classification then you certainly should appoint a professional vat agent with complete knowledge on uk vat rules and even eu vat rules if you import goods from any eu country. In the UK vat is spread into three slabs, namely the standard rate of 17.5% that will soon increase to 20% from January 4, 2011. There’s another lower rate of 5% which is also applicable on certain children?s goods as well as other services along with a zero vat rate on specific goods and services. Thus, if a certain product is taxed at 17.5% in that case your calculations will have to be according to that vat rate only.
As an example, let’s say you sell a product at ?100 to your client that attracts vat at 17.5% then your vat calculations will need to display the vat rate, i.e. ?17.50 after the product rate as well as the total amount of the sale including vat, i.e. ?117.50, the final value of your vat invoice. These amounts must also be calculated and summed up within your vat returns. Similarly any vat already paid on goods or services imported by you into the UK can be claimed back via a vat reclaim form which also needs to calculate the vat amount paid. You can easily put in a vat accounting software program on your desktop so as to accurately calculate vat on each vat invoice since mistakes will not be looked at kindly by the hmrc vat department.
Your vat returns will likely need calculations of varied vat amounts paid and calculated. These calculations may also differ on the vat scheme that you opt for because the flat rate scheme will require different calculations when compared to the other schemes. You will additionally need to read on the way to calculate vat amounts from vat exclusive and vat inclusive prices to get the exact amount of vat.
Accurate calculation of vat is extremely important while buying or selling items that are governed by vat tax. These amounts will need to be reflected in your purchases, sales, vat returns, and vat refunds too. Your business will run smoothly while hmrc will also remain happy with you only when your vat calculation is accurate and clear in your vat documents and books.
