When 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 your calculations in your vat invoices as well as your vat returns too.
In case you are based in the UK then you would have turned into a VAT registered trader once your taxable sales might have reached the vat threshold figure of 70,000 pounds within the past 12 months vatnumbersearch. This would lead to issuance of vat invoices by you to all of 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 your clients. To be able to calculate vat you should know the classification of the products or services as decided by HM Revenue and Customs or hmrc vat department that manages all aspects of vat in the United Kingdom.
There are 14,000 vat classifications provided by hmrc and if you’ve trouble in slotting your goods and services within the right classification then you certainly should appoint a professional vat agent with complete knowledge on uk vat rules as well as 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 services and goods resources. Thus, if a certain product is taxed at 17.5% in that case your calculations will have to be based on that vat rate only.
As an example, if you sell a product at ?100 to a client that attracts vat at 17.5% then 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, the final value of your vat invoice. These amounts must also be calculated and summed up in your vat returns. Similarly any vat already paid on goods or services imported by you into the UK might be claimed back through a vat reclaim form which also has to calculate the vat amount paid. You can easily put in a vat accounting software program on your computer in order 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 likely need calculations of various vat amounts paid and calculated. These calculations may also differ on the vat scheme that you choose since the flat rate scheme will require different calculations when compared to the other schemes. You will additionally need to read on how to calculate vat amounts from vat exclusive and vat inclusive prices to get the precise amount of vat.
Accurate calculation of vat is very 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 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.