Once you start issuing vat invoices to your clients then accurate vat calculation can help you calculate exact vat rates. Calculating vat rates is quite simple and you will need to display all of your calculations in your vat invoices as well as your vat returns too.
If you are located in the UK then you would have turned into a VAT registered trader as soon as your taxable sales would have reached the vat threshold figure of 70,000 pounds within the past Year. This would result in issuance of vat invoices by you to all of your future clients. Your vat invoice would need to mention your vat number together with vat validation vat rates next to your services or goods that you have sold to the clients. In order to calculate vat you need to know the classification of your products or 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 provided by hmrc just in case you have trouble in slotting your products or services in the right classification then you should appoint an expert vat agent with complete knowledge on uk vat rules and even eu vat rules in the event 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 is another lower rate of 5% that is also applicable on certain children?s goods and other services along with a zero vat rate on specific goods and services. Thus, in case a certain product is taxed at 17.5% then your calculations will need to be according to that vat rate only.
For example, if you sell an item at ?100 to a client that draws vat at 17.5% then your vat calculations will need to display the vat rate, i.e. ?17.50 following the product rate and also the total amount 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 goods or services imported by you into the UK can be claimed back via a vat reclaim form that also has to calculate the vat amount paid. You can easily install a vat accounting software program on your desktop so as to accurately calculate vat on each vat invoice since mistakes will not be viewed 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 because the flat rate scheme will call for different calculations when compared to the other schemes. You will additionally need to learn 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 selling or buying items that are governed by vat tax. These amounts will have to be reflected within your purchases, sales, vat returns, and vat refunds too. Your business will operate correctly while hmrc may also remain pleased with you once your vat calculation is accurate and clear in all your vat documents and books.