Precise vat calculations are a must for perfect vat accounting

If you’re a VAT registered trader in the UK or any other vat-enabled eu country then precise vat calculations really are a must for perfect vat accounting. All countries that have embraced vat use various vat rates on different goods and services, and you also have to calculate each vat rate precisely in order to file proper vat returns as well as give the correct amount of vat tax.

In the UK, all vat rules are issued by HM Revenue and Customs or hmrc vat department. Hmrc has classified all taxable and vat exempt services and goods into 14,000 classifications. Thus, any products or services which you purchase or sell is bound to come under one of these classifications. Many of these services and goods come under the regular vat rate of 17.5% that 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 vat registration number. Additionally, there are certain goods and services like those associated with charitable events, among others that fall under the vat exempt scheme where no vat is usually added or claimed back.

Your vat calculations will begin when you know the appropriate vat rate of each one of the goods and services. For instance, if you are selling a pair of shoes to the customers for ?200 without vat then at 17.5% vat, your vat amount will be ?35 whilst the total amount of your vat invoice including vat will be ?235. Similarly, let’s say you sell an item for ?50 that draws 5% vat rate then the vat amount on that product is going to be ?2.50 while the total amount inclusive of vat will be ?52.50. It is crucial to know your basic product or service cost, your vat cost and your total price inclusive of vat so that you can bill your clients at the best possible rates while also filing your vat returns without making any calculation errors.

Calculating the correct amount of vat is also vital whenever you make application for vat refunds additional reading. You’ll have to do this if your services or goods are imported to the UK from the other eu country that has already collected vat in it. In such a case, you would need to apply for vat reclaim to get your money back already paid in the country of origin. You should hire a specialist vat agent to ensure that probability of any miscalculations are minimized. Your vat agent can also take overall vat calculations so that all your vat returns and vat refunds are handled within the stipulated time frame and that too without calculation mistakes. The hmrc vat department offers various vat accounting schemes including the flat rate scheme, and in this type of 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 allow you to trade your services and goods after calculating proper profit margins. Since you will also need to file regular vat returns and might also have to make an application for vat refunds, precise vat calculations will allow you to stay on the appropriate side of the vat law.