Precise vat calculations undoubtedly 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 are a must for perfect vat accounting. All countries that have embraced vat use various vat rates on different services and goods, and you also need to calculate each vat rate precisely so as to file proper vat returns and also give the proper amount of vat www.vatnumbers.com 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 sell or buy is bound to fall under one of these classifications. Most of these goods and services fall under the standard vat rate of 17.5% which is slated to increase 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. There are also certain goods and services such as those associated with charitable events, amongst others that fall under the vat exempt scheme where no vat may be added or claimed back.

Your vat calculations will start when you know the appropriate vat rate of each one of your goods and services. For example, if you sell a pair of shoes to your 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, if you sell a product for ?50 that attracts 5% vat rate then your vat amount on that product will be ?2.50 whilst the total amount inclusive of vat is going to be ?52.50. It is very important to understand your basic products or services cost, your vat cost and your total cost inclusive of vat to be able to bill your customers in the best possible rates whilst filing your vat returns without creating any calculation errors.

Calculating the correct amount of vat can also be vital whenever you apply for vat refunds. 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 on them. In such a case, you should apply for vat reclaim to get back the money already paid in the country of origin. You need to hire an expert vat agent so that chances of any miscalculations are minimized. Your vat agent can also take overall vat calculations in order that all of your vat returns and vat refunds are handled within the stipulated time frame and that too without any calculation mistakes. The hmrc vat department offers various vat accounting schemes such as the flat rate scheme, and in such a case different calculation methods will have to be employed.

Although vat is not a very complex tax method, you will still require calculations that manage to separate your basic costs from taxes. This will likely allow you to purchase and sell your services and goods after calculating proper profits. As you will also need to file regular vat returns and may also have to apply for vat refunds, precise vat calculations will allow you to stay on the right side of the vat law.