Once you start issuing vat invoices to your clients then accurate vat calculation can help you calculate exact vat rates. Calculating vat rates is very easy and you will have to display all your calculations within your vat invoices as well as your vat returns too.
In case you are based in the UK then you would have converted 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 https://vatnumbersearch.com. This would result in issuance of vat invoices by you to all of your future clients. Your vat invoice will have to mention your vat number together with vat rates alongside your services or goods that you have sold to the clients. To be able to calculate vat you need to 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 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 then you certainly should appoint a professional 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 UK vat is spread into three slabs, namely the standard rate of 17.5% which will soon increase to 20% from January 4, 2011. There is another lower rate of 5% that is also applicable on certain children?s goods as well as other services and also a zero vat rate on specific goods and services my site. Thus, if a certain product is taxed at 17.5% in that case your calculations will have to be according to that vat rate only.
For example, if you sell a product at ?100 to a client that attracts vat at 17.5% then 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 to the UK might be claimed back via a vat reclaim form that also has to calculate the vat amount paid. You can easily put in a vat accounting software program on your desktop in order to accurately calculate vat on each vat invoice since mistakes won’t be looked at 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 since the flat rate scheme will call for different calculations as 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 precise amount of vat.
Accurate calculation of vat is extremely important while buying or selling items that are subject to vat tax. These amounts will have to be reflected within your purchases, sales, vat returns, and vat refunds too. Your business will run smoothly while hmrc may also remain happy with you only once your vat calculation is accurate and clear in your vat documents and books.