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 that have embraced vat use various vat rates on different services and goods, and you also need to calculate each vat rate precisely so as to file proper vat returns and also give the correct amount of vat vatnumbers 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 services and goods into 14,000 classifications. Thus, any product or service that you purchase or sell is likely to come under one of these classifications. Many of these goods and services come under the regular vat rate of 17.5% which is slated to increase to 20% from January 4, 2011 onwards. Other goods and services come under the lower vat rate of 5% while a limited number come under the zero vat rate. There are also certain services and goods such as those related to 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 appropriate vat rate of each of your 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 will be ?35 whilst the total amount of your vat invoice including vat is going to be ?235. Similarly, if you sell a product 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 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 price including vat so that you can bill your clients at the most effective rates whilst filing your vat returns without creating any calculation errors.

Calculating the correct amount of vat can also be vital whenever you apply for vat refunds. You would need to do that if your goods or services are imported into the UK from any other eu country that has already collected vat on them. When this occurs, you would need to apply for vat reclaim to get back the money already paid in the country of origin. You need to hire a specialist vat agent so 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 frame and that too without any 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 is not a very complex tax method, you still require calculations that are able to separate your basic costs from taxes. This will likely permit you to purchase and sell your goods and services after calculating proper profits. As you also have to file regular vat returns and might also have to make an application for vat refunds, precise vat calculations will allow you to remain on the appropriate side of the vat law.