Precise vat calculations undoubtedly are a must for perfect vat accounting

If you are a VAT registered trader in the United Kingdom or any other vat-enabled eu country then precise vat calculations really are a must for perfect vat accounting. All countries which have embraced vat use various vat rates on different goods and services, and you also need to calculate each vat rate precisely so as to file proper vat returns as well as pay the correct amount of vat 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 products or services that you sell or buy is likely to fall under one of these classifications. Many of these services and goods fall under the standard vat rate of 17.5% which is slated to rise to 20% from January 4, 2011 onwards. Other goods and services fall under the reduced vat rate of 5% while a limited number come under the zero vat rate. Additionally, there are certain services and goods such as those related to charitable events, among others that come 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 of your goods and services. For example, if you are selling a pair of shoes to the customers for ?200 without vat then at 17.5% vat, your vat amount will be ?35 whilst the total amount of your vat invoice including vat will be ?235. Similarly, let’s say you sell an item for ?50 that attracts 5% vat rate then the vat amount on that product will be ?2.50 while the total amount inclusive of vat will be ?52.50. It is crucial to know your basic products or services cost, your vat cost as well as your total price inclusive of vat so that you can bill your clients in the best possible rates whilst filing your vat returns without making any calculation errors.

Calculating the right amount of vat can also be vital whenever you apply for vat refunds. You’ll have to do this in case your goods or services are imported to the UK from the other eu country that has already collected vat on them. When this occurs, you should make application for vat reclaim to get your money back already paid in the country of origin. You need to hire an expert vat agent so that probability of any miscalculations are minimized. Your vat agent could 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 offers various vat accounting schemes such as the flat rate scheme, and in such a 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 likely permit you to purchase and sell your services and goods after calculating proper profits. As you will also need to file regular vat returns and might also need to apply for vat refunds, precise vat calculations will help you stay on the appropriate side of the vat law.