Once you start issuing vat invoices to your clients then accurate vat calculation will help you calculate exact vat rates. Calculating vat rates is very simple and you will have to display all your calculations within your vat invoices and your vat returns too.
In case you are based in the UK then you would have turned into a VAT registered trader as soon as your taxable sales would have reached the vat threshold figure of 70,000 pounds in the past Year www.vatnumbersearch.com. This could 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 vat rates next to your services or goods which you have sold to your clients. To be able 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 14,000 vat classifications provided by hmrc and if you have trouble in slotting your products or 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 if 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 lower 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 recommended reading. Thus, if a certain product is taxed at 17.5% in that case your calculations will need to be according to that vat rate only.
As an example, let’s say you sell a product at ?100 to a client that attracts 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 amount 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 might be claimed back via 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 won’t be viewed kindly by the hmrc vat department.
Your vat returns will also need calculations of varied vat amounts paid and calculated. These calculations will also differ on the vat scheme which you opt for since the flat rate scheme will require different calculations as compared to the other schemes. You will also need to learn on the way 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 extremely important while buying or selling goods that are governed by vat tax. These amounts will need to be reflected within your purchases, sales, vat returns, and vat refunds too. Your enterprise will operate correctly while hmrc may also remain happy with you only once your vat calculation is accurate and clear in all your vat documents and books.