When you start issuing vat invoices to your clients then accurate vat calculation will help you calculate exact vat rates. Calculating vat rates is very easy and you will need to display all your calculations in your vat invoices as well as your vat returns too.
In case you are based in the UK then you would have turned into a VAT registered trader once your taxable sales might have reached the vat threshold figure of 70,000 pounds within the past Year https://vatnumbersearch.com. This could lead to issuance of vat invoices by you to all your future clients. Your vat invoice would need to mention your vat number along with vat rates alongside your goods or services which you have sold to the clients. In order to calculate vat you should know the classification of the products or services as decided by HM Revenue and Customs or hmrc vat department that manages every aspect of vat in the United Kingdom.
There are 14,000 vat classifications provided by hmrc just in case you’ve trouble in slotting your goods and services within the right classification then you should appoint an expert vat agent with complete knowledge on uk vat rules and even eu vat rules if you import goods from any eu country. In the UK vat is spread into three slabs, namely the regular rate of 17.5% that 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 and other services along with a zero vat rate on specific goods and services related site. Thus, in case a certain product is taxed at 17.5% then your calculations will have to be based on that vat rate only.
For example, if you sell a product at ?100 to your client that attracts vat at 17.5% in that case your vat calculations will need to display the vat rate, i.e. ?17.50 following the product rate and also the total amount of the sale including vat, i.e. ?117.50, the final value of your vat invoice. These amounts must also be calculated and summed up in your vat returns. Similarly any vat already paid on services or goods imported by you into the UK might be claimed back through a vat reclaim form which also has to calculate the vat amount paid. It is possible to 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 because the flat rate scheme will call for different calculations as compared to the other schemes. You will additionally need to learn on how to calculate vat amounts from vat exclusive and vat inclusive prices so as to get the precise amount of vat.
Accurate calculation of vat is very important while selling or buying 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 pleased with you only when your vat calculation is accurate and clear in all your vat documents and books.