Precise vat calculations undoubtedly 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 need to calculate each vat rate precisely in order to file proper vat returns and also pay the proper amount of vat vat numbers tax.

In the United Kingdom, all vat rules are issued by 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 products or services which you purchase or sell is likely to fall under one of these classifications. Many of these services and goods come under the standard vat rate of 17.5% that is slated to increase to 20% from January 4, 2011 onwards. Other goods and services come under the reduced vat rate of 5% while a select few fall under the zero vat rate. There are also certain goods and services like those associated with charitable events, among others that fall under the vat exempt scheme where no vat may be added or claimed back.

Your vat calculations will begin once you know the correct vat rate of each one of the goods and services. For instance, 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 will be ?235. Similarly, if you sell a product for ?50 that draws 5% vat rate then your vat amount on that product will be ?2.50 while the total amount including vat is going to be ?52.50. It is crucial to understand your basic products or services cost, your vat cost as well as your total price including vat so that you can bill your clients in the best possible rates while also filing your vat returns without creating any calculation errors.

Calculating the correct amount of vat is also vital whenever you make application for vat refunds. You would need to do that in case your goods or services are imported to the UK from any other eu country which has already collected vat in it. When this occurs, you should make application for vat reclaim for getting your money back already paid in the country of origin. You should hire an expert vat agent to ensure that chances of any miscalculations are minimized. Your vat agent could also take over all vat calculations so that all of your vat returns and vat refunds are handled in the stipulated time frame and that too without calculation mistakes. The hmrc vat department offers various vat accounting schemes such as the flat rate scheme, and in such a case different calculation methods will need to be employed.

Although vat is not a very complex tax method, you will still require calculations that are able to separate your basic costs from taxes. This will likely allow you to trade your goods and services after calculating proper profits. Since you also have to file regular vat returns and might also need to make an application for vat refunds, precise vat calculations will allow you to remain on the right side of the vat law.