If you are 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 services and goods, and you also have to calculate each vat rate precisely in order to file proper vat returns and also give the correct amount of vat 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 goods and services into 14,000 classifications. Thus, any products or services that you purchase or sell is bound to fall under one of these classifications. Most of these services and goods fall under the regular vat rate of 17.5% which is slated to rise to 20% from January 4, 2011 onwards. Other goods and services come under the reduced vat rate of 5% while a limited number come under the zero vat rate vatregistrationnumber. There are also certain services and goods such as those associated with charitable events, among others that come under the vat exempt scheme where no vat is usually added or claimed back.
Your vat calculations will begin when you know the correct vat rate of every of your goods 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 will be ?235. Similarly, let’s say you sell a product for ?50 that draws 5% vat rate then the vat amount on that product will be ?2.50 while the total amount inclusive of vat is going to be ?52.50. It is crucial to understand your basic product or service cost, your vat cost as well as your total cost inclusive of vat to be able to bill your customers in the best possible rates whilst filing your vat returns without making any calculation errors.
Calculating the right amount of vat can also be vital when you make application for vat refunds visit website. You would need to do this if your goods or services are imported to the UK from any other eu country that has already collected vat in it. When this occurs, you should apply for vat reclaim to get back the money already paid in the country of origin. You need to hire a specialist vat agent to ensure that chances of any miscalculations are minimized. Your vat agent can also take over all vat calculations in order that all of 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 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 manage to separate your basic costs from taxes. This will likely permit you to trade your goods and services after calculating proper profits. Since you will also need to file regular vat returns and might also need to apply for vat refunds, precise vat calculations will help you stay on the right side of the vat law.