Accurate vat calculation can help you calculate exact vat rates
Once you start issuing vat invoices to the clients then accurate vat calculation can help you calculate exact vat rates. Calculating vat rates is quite easy and you will have to display all of your calculations within your vat invoices and your vat returns too.
In case you are located in the UK you would then 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 12 months. This could result in issuance of vat invoices by you to all of your future clients. Your vat invoice would need to mention your vat number along with vat rates alongside your services or goods which you have sold to the clients. In order to calculate vat you should know the classification of your goods and services as decided by HM Revenue and Customs or hmrc vat department that manages every aspect of vat in the UK.
There are actually 14,000 vat classifications given by hmrc and if you’ve trouble in slotting your products or services within the right classification then you 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 regular rate of 17.5% that will soon increase to 20% from January 4, 2011. There is another reduced rate of 5% which is also applicable on certain children?s goods and other services and also a zero vat rate on specific goods and services. Thus, if a certain product is taxed at 17.5% then your calculations will need to be based on that vat rate only.
As an example, if you sell an item at ?100 to your client that draws vat at 17.5% then your vat calculations will have to display the vat rate, i.e. ?17.50 after the product rate as well as the total quantity of the sale including vat, i.e. ?117.50, which is the final value of your vat invoice. These amounts will also need to be calculated and summed up within your vat returns. Similarly any vat already paid on services or goods imported by you to the UK can be claimed back via a vat reclaim form which also has to calculate the vat amount paid. It is possible to install a vat accounting software package on your computer so as to accurately calculate vat on each vat invoice since mistakes won’t be looked at kindly by the hmrc vat department.
Your vat returns will also need calculations of various vat amounts paid and calculated. These calculations will also differ on the vat scheme which you opt for since the flat rate scheme will call for different calculations as compared to the other schemes. You will also 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 very important while selling or buying goods that are subject to vat tax. These amounts will need to be reflected within your purchases, sales, vat returns, and vat refunds too. Your enterprise will operate correctly while hmrc will also remain pleased with you only when your vat calculation is accurate and clear in all your vat documents and books.