Precise vat calculations are a must for perfect vat accounting

If you are a VAT registered trader in the United Kingdom or other vat-enabled eu country then precise vat calculations are a must for perfect vat accounting. All countries which have embraced vat use various vat rates on different services and goods, and you also need to calculate each vat rate precisely so as to file proper vat returns and also give 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 product or service which you purchase or sell is bound to fall under one such classifications. Most of these services and goods fall under the regular vat rate of 17.5% which is slated to increase to 20% from January 4, 2011 onwards. Other services and goods come under the lower vat rate of 5% while a limited number fall under the zero vat rate. There are also certain goods and services like those related to charitable events, among others that fall under the vat exempt scheme where no vat is usually added or claimed back.

Your vat calculations will start once you know the correct vat rate of each one of your goods and services. For example, if you sell a pair of shoes to your customers for ?200 exclusive of vat then at 17.5% vat, your vat amount will be ?35 whilst the total amount of your vat invoice including vat is going to be ?235. Similarly, if you sell a product for ?50 that draws 5% vat rate then the vat amount on that product will be ?2.50 whilst the total amount including vat is going to be ?52.50. It is crucial to know your basic product or service cost, your vat cost and your total cost inclusive of vat to be able to bill your clients at the best possible rates while also filing your vat returns without creating any calculation errors.

Calculating the right amount of vat can also be vital when you make application for vat refunds. You’ll have to do that if your services or goods are imported to the UK from any other eu country which has already collected vat in it. In such a case, you should make application for vat reclaim for getting your money back already paid in the nation of origin. You should hire a specialist vat agent so that chances of any miscalculations are minimized. Your vat agent can also take overall vat calculations so that all your vat returns and vat refunds are handled in the stipulated time frame and that too without any calculation mistakes. The hmrc vat department also offers various vat accounting schemes such as the flat rate scheme, and in this type of case different calculation methods will have to be employed.

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