Precise vat calculations undoubtedly are a must for perfect vat accounting

If you are a VAT registered trader in the UK or any other vat-enabled eu country then precise vat calculations really are a must for perfect vat accounting. All countries that have embraced vat use various vat rates on different services and goods, and you need to calculate each vat rate precisely so as to file proper vat returns and also give the correct amount of vat 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 goods and services into 14,000 classifications. Thus, any product or service which you sell or buy is bound to come under one such classifications. Most of these services and goods come under the standard vat rate of 17.5% which is slated to increase to 20% from January 4, 2011 onwards. Other services and goods come under the reduced vat rate of 5% while a select few come under the zero vat rate vat registration number. There are also certain services and goods such as those associated with charitable events, among others that come under the vat exempt scheme where no vat is usually added or claimed back.

Your vat calculations will begin once you know the appropriate vat rate of each of the goods and services. For example, if you sell a pair of shoes to your customers for ?200 without vat then at 17.5% vat, your vat amount will be ?35 while the total amount of your vat invoice including vat is going to be ?235. Similarly, let’s say 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 is going to be ?52.50. It is crucial to know your basic products or services cost, your vat cost as well as your total cost including vat so that you can bill your clients at the best possible rates whilst filing your vat returns without creating any calculation errors.

Calculating the right amount of vat is also vital whenever you make application for vat refunds article source. You’ll have to do that if your services or goods are imported to the UK from the other eu country which has already collected vat on them. In such a case, you would need to make application for vat reclaim for getting your money back already paid in the nation of origin. You need to hire an expert vat agent to ensure that chances of any miscalculations are minimized. Your vat agent could also take overall vat calculations in order that all your vat returns and vat refunds are handled within the stipulated time period and that too without any calculation mistakes. The hmrc vat department also offers various vat accounting schemes such as the flat rate scheme, and in this type of case different calculation methods will have 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 likely permit you to purchase and sell your goods and services after calculating proper profit margins. Since you will also need to file regular vat returns and may also have to make an application for vat refunds, precise vat calculations will allow you to stay on the appropriate side of the vat law.