Precise vat calculations are a must for perfect vat accounting

If you’re a VAT registered trader in the United Kingdom or any other vat-enabled eu country then precise vat calculations really are a must for perfect vat accounting. All countries that have embraced vat use various vat rates on different services and goods, and you have to calculate each vat rate precisely so as to file proper vat returns and also pay the proper amount of vat vatnumbers.com tax.

In the United Kingdom, all vat rules are issued by HM Revenue and Customs or hmrc vat department. Hmrc has classified all taxable and vat exempt goods and services into 14,000 classifications. Thus, any products or services that you sell or buy is bound to come under one of these classifications. Most of these services and goods fall under the standard vat rate of 17.5% that is slated to rise to 20% from January 4, 2011 onwards. Other goods and services fall under the lower vat rate of 5% while a select few fall under the zero vat rate. There are also certain services and goods like those related to charitable events, among others that come under the vat exempt scheme where no vat can be added or claimed back.

Your vat calculations will start when you know the correct vat rate of every of the goods and services. For instance, if you sell a set of shoes to the customers for ?200 without vat then at 17.5% vat, your vat amount will be ?35 while the total amount of your vat invoice including vat is going to be ?235. Similarly, let’s say you sell a product for ?50 that draws 5% vat rate then your vat amount on that product is going to be ?2.50 whilst the total amount inclusive of vat will be ?52.50. It is very important to know your basic products or services cost, your vat cost as well as your total cost including vat to be able to bill your customers at the best possible rates whilst filing your vat returns without making any calculation errors.

Calculating the correct amount of vat is also vital whenever you apply for vat refunds. You would need to do this in case your services or goods are imported into the UK from any other eu country that has already collected vat in it. In such a case, you would need to apply for vat reclaim for getting back the money already paid in the nation of origin. You should hire a specialist vat agent so that chances of any miscalculations are minimized. Your vat agent could also take overall vat calculations in order that all of your vat returns and vat refunds are handled within the stipulated time frame and that too without any calculation mistakes. The hmrc vat department offers various vat accounting schemes such as the flat rate scheme, and in such a case different calculation methods will have to be employed.

Although vat is not a very complex tax method, you still require calculations that are able to separate your basic costs from taxes. This will likely allow you to purchase and sell your services and goods after calculating proper profits. As you will also need to file regular vat returns and may also have to make an application for vat refunds, precise vat calculations will help you remain on the appropriate side of the vat law.