Once you start issuing vat invoices to the clients then accurate vat calculation will help you calculate exact vat rates. Calculating vat rates is very simple and you will need to display all your calculations in your vat invoices and your vat returns too.
If you are based in the UK then you would have converted into a VAT registered trader as soon as your taxable sales might have reached the vat threshold figure of 70,000 pounds within the past Year. This could lead to issuance of vat invoices by you to all of your future clients. Your vat invoice would need to mention your vat number together with http://vatvalidation.com vat rates alongside your services or goods which you have sold to your clients. To be able to calculate vat you need to know the classification of your products or services as decided by HM Revenue and Customs or hmrc vat department that manages all aspects of vat in the UK.
There are 14,000 vat classifications provided by hmrc just in case you have trouble in slotting your goods and 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 United Kingdom vat is spread into three slabs, namely the standard rate of 17.5% which will soon increase to 20% from January 4, 2011. There’s another reduced 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 services and goods. Thus, in case a certain product is taxed at 17.5% in that case your calculations will need to be based on that vat rate only.
As an example, let’s say you sell an item at ?100 to a client that draws 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, 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 needs to calculate the vat amount paid. It is possible to install a vat accounting software program on your desktop so as to accurately calculate vat on each vat invoice since mistakes won’t be viewed 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 because the flat rate scheme will call for different calculations as compared to the other schemes. You will additionally need to read 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 selling or buying goods that are governed by vat tax. These amounts will need to be reflected in your purchases, sales, vat returns, and vat refunds too. Your enterprise will operate correctly while hmrc will also remain pleased with you when your vat calculation is accurate and clear in your vat documents and books.