Precise vat calculations undoubtedly are a must for perfect vat accounting

If you’re a VAT registered trader in the United Kingdom or other vat-enabled eu country then precise vat calculations are a must for perfect vat accounting. All countries that 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 give the proper amount of vat tax.

In the UK, all vat rules are issued by HM Revenue and Customs or hmrc vat department. Hmrc has classified all taxable and vat exempt services and goods into 14,000 classifications. Thus, any product or service that you purchase or sell is bound to fall under one of these classifications. Many of these services and goods fall under the standard 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 limited number fall under the zero vat rate. Additionally, there are certain services and goods such as those associated with 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 when you know the appropriate vat rate of each of the goods and services. For example, if you are selling a set of shoes to the customers for ?200 exclusive of vat then at 17.5% vat, your vat amount is going to be ?35 whilst 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 while the total amount inclusive of vat will be ?52.50. It is very important to understand your basic product or service cost, your vat cost as well as your total price including 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. 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 would need to make application for vat reclaim for getting back the money already paid in the nation of origin. You should hire a specialist vat agent so that probability of any miscalculations are minimized. Your vat agent could 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 also 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 isn’t a very complex tax method, you still require calculations that are able to separate your basic costs from taxes. This will permit you to trade your services and goods after calculating proper profit margins. As you will also need to file regular vat returns and might also need to apply for vat refunds, precise vat calculations will help you stay on the right side of the vat law.