Precise vat calculations undoubtedly are a must for perfect vat accounting

If you’re a VAT registered trader in the UK 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 goods and services, and you also need to calculate each vat rate precisely so as to file proper vat returns and also give the correct amount of vat tax.

In the UK, 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 bound to come under one of these classifications. Many of these goods and services fall under the regular vat rate of 17.5% that is slated to increase to 20% from January 4, 2011 onwards. Other services and goods fall under the lower vat rate of 5% while a limited number come under the zero vat rate There are also certain services and goods such as those associated with charitable events, among others that come under the vat exempt scheme where no vat can be added or claimed back.

Your vat calculations will start when you know the appropriate vat rate of each of the goods and services. For example, if you are selling a set of shoes to the 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 while the total amount inclusive of vat is going to be ?52.50. It is crucial to understand your basic products or services cost, your vat cost and your total price including 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 is also vital when you make application for vat refunds extra resources. You would need to do that if your goods or services are imported into the UK from any other eu country which has already collected vat in it. In such a case, you would need to apply for vat reclaim for getting back the money already paid in the nation of origin. You need to hire a specialist vat agent to ensure that probability of any miscalculations are minimized. Your vat agent could also take over all 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 this type of case different calculation methods will have to be employed.

Although vat is not a very complex tax method, you will still require calculations that manage to separate your basic costs from taxes. This will permit you to purchase and sell your goods and services after calculating proper profit margins. Since you will also need to file regular vat returns and may also need to make an application for vat refunds, precise vat calculations will help you remain on the appropriate side of the vat law.