Once you start issuing vat invoices to your clients then accurate vat calculation can 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 as well as 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 would have reached the vat threshold figure of 70,000 pounds in the past 12 months vat number search. This would result in issuance of vat invoices by you to all your future clients. Your vat invoice would need to mention your vat number together with vat rates alongside your goods or services that you have sold to the clients. To be able to calculate vat you should 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 given by hmrc and if you have trouble in slotting your products or 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 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% that will soon increase to 20% from January 4, 2011. There’s another lower 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 my site. Thus, in case a certain product is taxed at 17.5% in that case your calculations will need to be according to that vat rate only.
As an example, if 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, which is 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 goods or services imported by you to the UK might be claimed back through a vat reclaim form that also needs to calculate the vat amount paid. You can easily install a vat accounting software package on your desktop in order to accurately calculate vat on each vat invoice since mistakes will not 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 choose because the flat rate scheme will require different calculations when 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 exact amount of vat.
Accurate calculation of vat is very important while buying or selling goods that are subject to vat tax. These amounts will need to be reflected in your purchases, sales, vat returns, and vat refunds too. Your business will run smoothly while hmrc will also remain pleased with you only when your vat calculation is accurate and clear in all your vat documents and books.