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 simple and you will have to display all your calculations within your vat invoices and your vat returns too.
In case you are located 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 in the past 12 months. This would lead to issuance of vat invoices by you to all of your future clients. Your vat invoice would need to mention your vat number together with vat rates alongside your goods or services which you have sold to your clients. In order to calculate vat you need to 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 UK.
There are actually 14,000 vat classifications provided by hmrc just in case you have trouble in slotting your goods and services within the right classification then you certainly should appoint an expert vat agent with complete knowledge on uk vat rules as well as eu vat rules in the event you import goods from any eu country. In the UK vat is spread into three slabs, namely the regular rate of 17.5% which will soon increase to 20% from January 4, 2011. There’s another reduced rate of 5% which is also applicable on certain children?s goods and other services along with a zero vat rate on specific services and goods. Thus, in case a certain product is taxed at 17.5% in that case your calculations will need to be based on that vat rate only.
For example, if you sell a product at ?100 to your client that draws vat at 17.5% in that case your vat calculations will have to display the vat rate, i.e. ?17.50 following the product rate as well as the total quantity of the sale including vat, i.e. ?117.50, which is 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 to the UK might be claimed back via a vat reclaim form that also needs to calculate the vat amount paid. It is possible to put in a vat accounting software program on your desktop 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 varied vat amounts paid and calculated. These calculations will also differ on the vat scheme that you opt for because the flat rate scheme will require different calculations as compared to the other schemes. You will additionally need to read on the way to calculate vat amounts from vat exclusive and vat inclusive prices so as to get the precise amount of vat.
Accurate calculation of vat is extremely important while buying or selling items that are governed by vat tax. These amounts will need to be reflected within your purchases, sales, vat returns, and vat refunds too. Your business will operate correctly while hmrc will also remain pleased with you once your vat calculation is accurate and clear in your vat documents and books.