Once you start issuing vat invoices to your clients then accurate vat calculation will help you calculate exact vat rates. Calculating vat rates is very simple and you will have to display all your calculations in your vat invoices and your vat returns too.
In case you are located in the UK you would then have converted into a VAT registered trader once your taxable sales might have reached the vat threshold figure of 70,000 pounds in the past 12 months. This could result in issuance of vat invoices by you to all of your future clients. Your vat invoice would need to mention your vat number along with http://vatvalidation.com vat rates alongside your goods or services which you have sold to your clients. To be able 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 every aspect of vat in the United Kingdom.
There are actually 14,000 vat classifications given by hmrc and if you’ve trouble in slotting your products or services within the right classification then you certainly should appoint an expert vat agent with complete knowledge on uk vat rules as well as eu vat rules if you import goods from any eu country. In the United Kingdom vat is spread into three slabs, namely the standard rate of 17.5% which will soon increase to 20% from January 4, 2011. There is another lower rate of 5% that is also applicable on certain children?s goods and other services along with a zero vat rate on specific services and goods. Thus, if a certain product is taxed at 17.5% then your calculations will need to be according to that vat rate only.
For example, if you sell a product at ?100 to your client that draws vat at 17.5% in that case your vat calculations will have to display the vat rate, i.e. ?17.50 after 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 will also need to be calculated and summed up in 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 that also has to calculate the vat amount paid. You can easily install a vat accounting software package on your computer so as 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 that you choose since the flat rate scheme will require different calculations as compared to the other schemes. You will additionally need to learn on how to calculate vat amounts from vat exclusive and vat inclusive prices so as to get the exact amount of vat.
Accurate calculation of vat is extremely important while selling or buying goods that are subject to vat tax. These amounts will have to be reflected within your purchases, sales, vat returns, and vat refunds too. Your enterprise will operate correctly while hmrc may also remain happy with you only when your vat calculation is accurate and clear in your vat documents and books.