When you start issuing vat invoices to your clients then accurate vat calculation can help you calculate exact vat rates. Calculating vat rates is very easy and you will have to display all your calculations within your vat invoices and your vat returns too.
In case you are based 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 in the past Year vat number search. This could result in issuance of vat invoices by you to all your future clients. Your vat invoice will have to mention your vat number together with vat rates next to your goods or services 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 all aspects of vat in the UK.
There are actually 14,000 vat classifications given by hmrc and if you’ve trouble in slotting your goods and services in the right classification you then 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 United Kingdom 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 reduced rate of 5% that is also applicable on certain children?s goods as well as other services and also a zero vat rate on specific goods and services continue reading. Thus, if a certain product is taxed at 17.5% then your calculations will have to be according to that vat rate only.
As an example, if you sell a product at ?100 to a client that draws vat at 17.5% in that case your vat calculations will need to display the vat rate, i.e. ?17.50 following the product rate as well as 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 in your vat returns. Similarly any vat already paid on goods or services imported by you to the UK can be claimed back via a vat reclaim form that also has to calculate the vat amount paid. You can easily put in a vat accounting software program on your computer 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 may also differ on the vat scheme which you choose since the flat rate scheme will require different calculations as 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 so as 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 have to be reflected within your purchases, sales, vat returns, and vat refunds too. Your business will run smoothly while hmrc may also remain happy with you when your vat calculation is accurate and clear in your vat documents and books.