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Accurate vat calculation can help you calculate exact vat rates


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Once you start issuing vat invoices to your clients then accurate vat calculation will help you calculate exact vat rates. Calculating vat rates is quite simple and you will need to display all of your calculations in your vat invoices as well as your vat returns too.

In case you are located in the UK you would then have turned into a VAT registered trader as soon as your taxable sales might have reached the vat threshold figure of 70,000 pounds within the past 12 months. 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 vat rates next to your services or goods which you have sold to the clients. In order to calculate vat you need to 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 actually 14,000 vat classifications provided by hmrc and if you have trouble in slotting your goods and services within the right classification then you should appoint a professional 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 UK vat is spread into three slabs, namely the regular rate of 17.5% which will soon increase to 20% from January 4, 2011. There is another reduced rate of 5% which is also applicable on certain children?s goods as well as 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 need to be based on that vat rate only.

As an example, if you sell an item at ?100 to your client that draws vat at 17.5% then your vat calculations will need to display the vat rate, i.e. ?17.50 after 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 will also need to be calculated and summed up within your vat returns. Similarly any vat already paid on goods or services imported by you to the UK can 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 package on your computer so as to accurately calculate vat on each vat invoice since mistakes will not be viewed kindly by the hmrc vat department.

Your vat returns will also need calculations of various vat amounts paid and calculated. These calculations may also differ on the vat scheme that you choose since the flat rate scheme will require different calculations as compared to the other schemes. You will additionally need to read on the way 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 selling or buying items that are governed by vat tax. These amounts will need to be reflected in your purchases, sales, vat returns, and vat refunds too. Your enterprise will run smoothly while hmrc will also remain happy with you once your vat calculation is accurate and clear in all your vat documents and books.