When you start issuing vat invoices to your clients then accurate vat calculation can help you calculate exact vat rates. Calculating vat rates is very easy and you will have to display all your calculations within your vat invoices and your vat returns too.
If you are based in the UK then you would have converted 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 vatnumbersearch. This would result in issuance of vat invoices by you to all of your future clients. Your vat invoice will have to mention your vat number together with vat rates next to your goods or services that you have sold to the clients. In order to calculate vat you should know the classification of the goods and services as decided by HM Revenue and Customs or hmrc vat department that manages every aspect of vat in the United Kingdom.
There are actually 14,000 vat classifications given by hmrc and if you have trouble in slotting your goods and services within the right classification you then should appoint an expert 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 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 reduced rate of 5% which is also applicable on certain children?s goods and other services and also a zero vat rate on specific goods and services read more here. Thus, if a certain product is taxed at 17.5% then your calculations will need to be based on that vat rate only.
For example, if you sell an item 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 quantity 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 in your vat returns. Similarly any vat already paid on goods or services imported by you into the UK can be claimed back via a vat reclaim form that also needs to calculate the vat amount paid. You can easily 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 viewed 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 which you choose because the flat rate scheme will require 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 precise 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 operate correctly while hmrc will also remain pleased with you once your vat calculation is accurate and clear in all your vat documents and books.