Precise vat calculations 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 which have embraced vat use various vat rates on different services and goods, and you have to calculate each vat rate precisely so as to file proper vat returns and also give the proper amount of vat tax.

In the United Kingdom, all vat rules are from 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 product or service that you purchase or sell is likely to fall under one of these classifications. Many of these goods and services come under the regular vat rate of 17.5% which 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 select few fall under the zero vat rate www.vatregistrationnumber.com. There are also certain services and goods like those related to charitable events, amongst others that fall under the vat exempt scheme where no vat is usually added or claimed back.

Your vat calculations will begin once you know the correct vat rate of each one of the goods and services. For example, if you are selling a pair of shoes to the customers for ?200 exclusive of vat then at 17.5% vat, your vat amount is going to be ?35 while the total amount of your vat invoice including vat will be ?235. Similarly, if you sell an item for ?50 that attracts 5% vat rate then the vat amount on that product will be ?2.50 whilst the total amount including vat will be ?52.50. It is crucial to understand your basic products or services cost, your vat cost and your total cost inclusive of vat so that you can bill your customers in the best possible rates while also filing your vat returns without making any calculation errors.

Calculating the right amount of vat is also vital when you make application for vat refunds click to read more. You’ll have to do this in case your services or goods are imported to the UK from the other eu country that has already collected vat in it. In such a case, you should apply for vat reclaim for getting back the money already paid in the country of origin. You should hire an expert vat agent to ensure that probability of any miscalculations are minimized. Your vat agent can also take overall vat calculations so that all of your vat returns and vat refunds are handled within the stipulated time period and that too without 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 need to be employed.

Although vat isn’t a very complex tax method, you will still require calculations that are able to separate your basic costs from taxes. This will likely permit you to trade your goods and services 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 allow you to remain on the right side of the vat law.