Precise vat calculations are a must for perfect vat accounting

If you are 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 goods and services, and you also have to calculate each vat rate precisely in order to file proper vat returns and also pay the proper amount of vat tax.

In the United Kingdom, all vat rules are issued by HM Revenue and Customs or hmrc vat department. Hmrc has classified all taxable and vat exempt goods and services into 14,000 classifications. Thus, any products or services that you sell or buy is likely to fall under one of these classifications. Many of these services and goods come under the standard 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 fall under the zero vat rate Additionally, there are certain services and goods like those associated with charitable events, among others that come 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 of your goods and services. For instance, if you are selling a set of shoes to the customers for ?200 exclusive of 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 a product for ?50 that attracts 5% vat rate then the vat amount on that product will be ?2.50 while the total amount including 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 inclusive of vat to be able to bill your customers at the most effective rates while also filing your vat returns without creating any calculation errors.

Calculating the right amount of vat can also be vital whenever you make application for vat refunds read full report. You would need to do this if your services or goods are imported into the UK from the other eu country that has already collected vat in it. In such a case, you would need to make application for vat reclaim for getting your money back already paid in the country of origin. You should hire a specialist vat agent to ensure that chances of any miscalculations are minimized. Your vat agent could also take over all vat calculations so that all of 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 need 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 permit you to purchase and sell your services and goods after calculating proper profits. Since you will also need to file regular vat returns and may also have to make an application for vat refunds, precise vat calculations will help you remain on the right side of the vat law.