Precise vat calculations are a must for perfect vat accounting

If you are a VAT registered trader in the United Kingdom 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 as well as 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 product or service that you sell or buy is likely to fall under one of these classifications. Most 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 services and goods come under the lower vat rate of 5% while a select few fall under the zero vat rate Additionally, there are certain goods and services such as those associated with charitable events, among others that fall under the vat exempt scheme where no vat is usually added or claimed back.

Your vat calculations will start once you know the correct vat rate of each one of your goods and services. For example, if you sell a set of shoes to the customers for ?200 without 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 draws 5% vat rate then the vat amount on that product is going to be ?2.50 whilst the total amount inclusive of vat is going to be ?52.50. It is crucial to know your basic product or service cost, your vat cost as well as your total cost including vat to be able to bill your customers in the best possible rates whilst filing your vat returns without creating any calculation errors.

Calculating the right amount of vat can also be vital when you make application for vat refunds go here. You’ll have to do that in case your services or goods are imported into the UK from any other eu country that has already collected vat on them. When this occurs, you would need to make application for vat reclaim for getting back the money already paid in the nation of origin. You should hire an expert vat agent so that chances of any miscalculations are minimized. Your vat agent could also take overall vat calculations in order 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 such as the flat rate scheme, and in this type of case different calculation methods will need to be employed.

Although vat isn’t 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 might also have to apply for vat refunds, precise vat calculations will help you stay on the appropriate side of the vat law.