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 simple and you will need to display all your calculations within 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 in the past Year. This could result in issuance of vat invoices by you to all your future clients. Your vat invoice would need to mention your vat number along 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 the goods and services as decided by HM Revenue and Customs or hmrc vat department that manages every aspect of vat in the UK.
There are actually 14,000 vat classifications provided by hmrc just in case you’ve trouble in slotting your goods and services within the right classification you then should appoint an expert vat agent with complete knowledge on uk vat rules as well as eu vat rules if 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 and other services and also a zero vat rate on specific services and goods. Thus, if a certain product is taxed at 17.5% in that case your calculations will have to be based on that vat rate only.
As an example, if you sell a product at ?100 to your client that attracts vat at 17.5% then your vat calculations will have to display the vat rate, i.e. ?17.50 following the product rate as well as 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 within your vat returns. Similarly any vat already paid on goods or services imported by you into the UK can be claimed back through a vat reclaim form which also needs to calculate the vat amount paid. You can easily 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 viewed kindly by the hmrc vat department.
Your vat returns will likely need calculations of varied vat amounts paid and calculated. These calculations will also differ on the vat scheme that you opt for since the flat rate scheme will require different calculations when compared to the other schemes. You will also need to learn 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 buying or selling goods that are subject to vat tax. These amounts will have to be reflected in your purchases, sales, vat returns, and vat refunds too. Your business will operate correctly while hmrc may also remain happy with you only when your vat calculation is accurate and clear in your vat documents and books.