Precise vat calculations are a must for perfect vat accounting

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

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

Your vat calculations will start when you know the appropriate vat rate of each of your products and services. For example, if you are selling a pair of shoes to the customers for ?200 without vat then at 17.5% vat, your vat amount is going to be ?35 while the total amount of your vat invoice including vat is going to be ?235. Similarly, if you sell a product for ?50 that attracts 5% vat rate then the vat amount on that product is going to be ?2.50 while the total amount inclusive of vat will be ?52.50. It is crucial to know your basic products or services cost, your vat cost as well as your total price including vat to be able to bill your customers at the best possible rates while also filing your vat returns without creating any calculation errors.

Calculating the correct amount of vat is also vital when you make application for vat refunds. You’ll have to do this if your goods or services are imported to the UK from any other eu country which has already collected vat in it. When this occurs, you would need to apply for vat reclaim for getting back the money already paid in the country of origin. You should hire a specialist vat agent to ensure that probability of any miscalculations are minimized. Your vat agent could also take overall vat calculations so that all your vat returns and vat refunds are handled in the stipulated time frame and that too without calculation mistakes. The hmrc vat department offers various vat accounting schemes including the flat rate scheme, and in this type of 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 goods and services after calculating proper profit margins. As you also have to file regular vat returns and might also have to apply for vat refunds, precise vat calculations will allow you to remain on the right side of the vat law.