When you start issuing vat invoices to the 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 in your vat invoices and your vat returns too.
In case you are located in the UK then you would have converted 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 www.vatnumbersearch.com. This could lead to issuance of vat invoices by you to all your future clients. Your vat invoice would need to mention your vat number together with vat rates alongside your goods or services that you have sold to your clients. To be able to calculate vat you need to know the classification of the goods and services as decided by HM Revenue and Customs or hmrc vat department that manages all aspects of vat in the United Kingdom.
There are actually 14,000 vat classifications given by hmrc and if you have trouble in slotting your products or services within the right classification then you certainly should appoint a professional 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 regular rate of 17.5% that will soon increase to 20% from January 4, 2011. There’s another reduced rate of 5% that is also applicable on certain children?s goods as well as other services along with a zero vat rate on specific services and goods website. Thus, if a certain product is taxed at 17.5% in that case your calculations will need to be according to that vat rate only.
For example, let’s say you sell an item at ?100 to a 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 and also the total amount 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 within your vat returns. Similarly any vat already paid on goods or services imported by you to the UK can be claimed back through a vat reclaim form that also needs to calculate the vat amount paid. You can easily install a vat accounting software package on your desktop so as to accurately calculate vat on each vat invoice since mistakes won’t 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 choose since the flat rate scheme will require different calculations when compared to the other schemes. You will also 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 subject to vat tax. These amounts will need to be reflected within your purchases, sales, vat returns, and vat refunds too. Your business will run smoothly while hmrc will also remain happy with you only when your vat calculation is accurate and clear in your vat documents and books.