Accurate vat calculation will help you calculate exact vat rates

Once you start issuing vat invoices to the clients then accurate vat calculation will help you calculate exact vat rates. Calculating vat rates is quite simple and you will have 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 would have reached the vat threshold figure of 70,000 pounds within the past Year. This could result in 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 next to your services or goods which you have sold to the clients. To be able to calculate vat you should know the classification of your 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 given by hmrc and if you’ve trouble in slotting your products or services within the right classification then you should appoint an expert 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 United Kingdom vat is spread into three slabs, namely the standard rate of 17.5% which will soon increase to 20% from January 4, 2011. There’s another lower 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 goods and services. Thus, in case a certain product is taxed at 17.5% then your calculations will need to be according to that vat rate only.

For example, if you sell an item at ?100 to a client that draws vat at 17.5% then your vat calculations will need to display the vat rate, i.e. ?17.50 after the product rate and also the total quantity of the sale including vat, i.e. ?117.50, which is the final value of your vat invoice. These amounts will also need to be calculated and summed up within your vat returns. Similarly any vat already paid on services or goods imported by you into 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 package on your desktop so as 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 will also differ on the vat scheme that you choose since the flat rate scheme will call for different calculations as compared to the other schemes. You will additionally need to learn on the way to calculate vat amounts from vat exclusive and vat inclusive prices to get the exact amount of vat.

Accurate calculation of vat is very important while selling or buying goods that are governed by vat tax. These amounts will have to be reflected in your purchases, sales, vat returns, and vat refunds too. Your enterprise will run smoothly while hmrc will also remain happy with you only when your vat calculation is accurate and clear in all your vat documents and books.