Accurate vat calculation can help you calculate exact vat rates

When 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 need to display all of your calculations in your vat invoices and your vat returns too.

If you are located in the UK then you would have turned into a VAT registered trader as soon as your taxable sales might have reached the vat threshold figure of 70,000 pounds in the past 12 months. This could result in issuance of vat invoices by you to all your future clients. Your vat invoice will have to mention your vat number along with vatvalidation vat rates next to your goods or services which you have sold to your 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 provided by hmrc just in case you have trouble in slotting your products or services within the right classification you then 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 UK vat is spread into three slabs, namely the standard rate of 17.5% which will soon increase to 20% from January 4, 2011. There is 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. Thus, in case a certain product is taxed at 17.5% then your calculations will have to be based on that vat rate only.

As an example, let’s say 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 after the product rate as well as the total amount of the sale including vat, i.e. ?117.50, 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 can be claimed back via a vat reclaim form which also has to calculate the vat amount paid. It is possible to put in a vat accounting software program on your computer 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 likely need calculations of varied vat amounts paid and calculated. These calculations may also differ on the vat scheme which you opt for since the flat rate scheme will call for different calculations as compared to the other schemes. You will also need to learn on how to calculate vat amounts from vat exclusive and vat inclusive prices to get the precise amount of vat.

Accurate calculation of vat is very important while buying or selling goods that are governed by vat tax. These amounts will have 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 when your vat calculation is accurate and clear in your vat documents and books.