When 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 within your vat invoices as well as your vat returns too.
If you are based in the UK you would then have turned into a VAT registered trader once your taxable sales might have reached the vat threshold figure of 70,000 pounds within the past 12 months. This would lead to issuance of vat invoices by you to all your future clients. Your vat invoice will have to mention your vat number along with vatvalidation.com vat rates alongside your services or goods which you have sold to your clients. In order to calculate vat you should know the classification of the products or services as decided by HM Revenue and Customs or hmrc vat department that manages all aspects of vat in the UK.
There are 14,000 vat classifications given by hmrc and if you have trouble in slotting your products or services in the right classification then you 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% that 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 as well as other services along with a zero vat rate on specific goods and services. Thus, if a certain product is taxed at 17.5% then your calculations will have to be based on that vat rate only.
For example, let’s say you sell a product at ?100 to your client that attracts vat at 17.5% in that case your vat calculations will need to display the vat rate, i.e. ?17.50 following the product rate as well as the total quantity of the sale including vat, i.e. ?117.50, which is 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 services or goods imported by you into the UK might be claimed back via a vat reclaim form that also needs to calculate the vat amount paid. It is possible to put in a vat accounting software program on your computer in order 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 may also differ on the vat scheme which you opt for because the flat rate scheme will require different calculations when compared to the other schemes. You will also need to learn on how to calculate vat amounts from vat exclusive and vat inclusive prices to get the exact amount of vat.
Accurate calculation of vat is very important while buying or selling goods that are subject to vat tax. These amounts will need to be reflected in your purchases, sales, vat returns, and vat refunds too. Your business will run smoothly while hmrc will also remain pleased with you only when your vat calculation is accurate and clear in all your vat documents and books.