Precise vat calculations are a must for perfect vat accounting

If you’re a VAT registered trader in the United Kingdom or 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 services and goods, and you need to calculate each vat rate precisely so as to file proper vat returns and also pay the proper amount of vat vatnumbers 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 that you sell or buy is likely to fall under one such classifications. Many of these goods and services come under the regular vat rate of 17.5% that is slated to increase to 20% from January 4, 2011 onwards. Other services and goods come under the lower vat rate of 5% while a select few come under the zero vat rate. Additionally, there are certain goods and services such as those related to charitable events, among others that come under the vat exempt scheme where no vat is usually added or claimed back.

Your vat calculations will start once you know the correct vat rate of each one of the goods and services. For instance, if you are selling a set of shoes to your customers for ?200 exclusive of vat then at 17.5% vat, your vat amount is going to be ?35 whilst the total amount of your vat invoice including vat is going to be ?235. Similarly, let’s say you sell an item for ?50 that draws 5% vat rate then your vat amount on that product is going to be ?2.50 while the total amount inclusive of vat will be ?52.50. It is very important to know your basic products or services cost, your vat cost as well as your total price including vat so that you can bill your clients in the most effective rates whilst filing your vat returns without making any calculation errors.

Calculating the correct amount of vat is also vital when you apply for vat refunds. You’ll have to do that in case your goods or services are imported to the UK from any other eu country that has already collected vat in it. When this occurs, you would need to make application for vat reclaim to get back the money already paid in the nation of origin. You need to hire an expert vat agent to ensure that probability of any miscalculations are minimized. Your vat agent could also take overall vat calculations in order that all of your vat returns and vat refunds are handled within the stipulated time period and that too without any calculation mistakes. The hmrc vat department also offers various vat accounting schemes such as 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 will still require calculations that are able to separate your basic costs from taxes. This will allow you to purchase and sell your services and goods after calculating proper profit margins. Since you will also need to file regular vat returns and may also have to apply for vat refunds, precise vat calculations will help you stay on the appropriate side of the vat law.