Once you start issuing vat invoices to your clients then accurate vat calculation can help you calculate exact vat rates. Calculating vat rates is quite easy and you will need to display all your calculations in your vat invoices and your vat returns too.
In case you are located in the UK then you would have turned into a VAT registered trader once your taxable sales would have reached the vat threshold figure of 70,000 pounds within the past Year. 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 along with vatvalidation.com vat rates alongside your services or goods that you have sold to your clients. In order to calculate vat you need to know the classification of your 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 then you should appoint an expert vat agent with complete knowledge on uk vat rules as well as eu vat rules if you import goods from any eu country. In the UK vat is spread into three slabs, namely the regular rate of 17.5% which will soon increase to 20% from January 4, 2011. There’s another lower rate of 5% which 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% in that case your calculations will need to be based on that vat rate only.
For 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 following the product rate and also the total quantity of the sale including vat, i.e. ?117.50, which is the final value of your vat invoice. These amounts must also be calculated and summed up within your vat returns. Similarly any vat already paid on goods or services imported by you to the UK might be claimed back through a vat reclaim form which also has to calculate the vat amount paid. It is possible to install a vat accounting software program on your computer so as to accurately calculate vat on each vat invoice since mistakes will not be viewed kindly by the hmrc vat department.
Your vat returns will likely need calculations of varied vat amounts paid and calculated. These calculations will also differ on the vat scheme which you opt for because the flat rate scheme will call for different calculations when compared to the other schemes. You will additionally need to read on how to calculate vat amounts from vat exclusive and vat inclusive prices so as to get the precise amount of vat.
Accurate calculation of vat is very important while buying or selling items that are subject to vat tax. These amounts will need to be reflected within your purchases, sales, vat returns, and vat refunds too. Your enterprise 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.