If you’re 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 also have to calculate each vat rate precisely in order to file proper vat returns as well as pay the proper amount of vat tax.
In the UK, 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 products or services which you sell or buy is bound to come under one such classifications. Many of these goods and services fall under the regular vat rate of 17.5% that is slated to rise to 20% from January 4, 2011 onwards. Other goods and services fall under the lower vat rate of 5% while a limited number fall under the zero vat rate www.vatregistrationnumber.com. There are also certain goods and services such as those related to charitable events, amongst others that come 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 one of the goods and services. For example, if you sell a set of shoes to your customers for ?200 without vat then at 17.5% vat, your vat amount will be ?35 whilst the total amount of your vat invoice including vat will be ?235. Similarly, let’s say you sell an item for ?50 that attracts 5% vat rate then the vat amount on that product will be ?2.50 whilst the total amount inclusive of vat is going to be ?52.50. It is very important to know your basic products or services cost, your vat cost and your total cost including vat so that you can bill your clients in the best possible rates while also filing your vat returns without making any calculation errors.
Calculating the correct amount of vat can also be vital when you apply for vat refunds find here. You would need to do that in case your services or goods are imported into the UK from any other eu country which has already collected vat in it. When this occurs, you should apply for vat reclaim to get your money back already paid in the country of origin. You need to hire a specialist vat agent to ensure that probability of any miscalculations are minimized. Your vat agent can also take overall vat calculations so that all your vat returns and vat refunds are handled in the stipulated time frame and that too without any calculation mistakes. The hmrc vat department also offers various vat accounting schemes including the flat rate scheme, and in such a case different calculation methods will have to be employed.
Although vat isn’t a very complex tax method, you will still require calculations that are able to separate your basic costs from taxes. This will allow you to purchase and sell your goods and services after calculating proper profit margins. Since you also have to file regular vat returns and might also need to apply for vat refunds, precise vat calculations will help you stay on the appropriate side of the vat law.