When you start issuing vat invoices to your clients then accurate vat calculation will help you calculate exact vat rates. Calculating vat rates is quite easy and you will have to display all of your calculations within your vat invoices as well as your vat returns too.
If you are located in the UK then you would 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 www.vatnumbersearch.com. 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 together with vat rates alongside your goods or services that you have sold to the clients. In order to calculate vat you should know the classification of the goods and services as decided by HM Revenue and Customs or hmrc vat department that manages all aspects of vat in the UK.
There are 14,000 vat classifications provided by hmrc just in case you’ve trouble in slotting your goods and services in the right classification then you should appoint an expert vat agent with complete knowledge on uk vat rules and even eu vat rules if 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’s another lower 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 goods and services more bonuses. Thus, in case a certain product is taxed at 17.5% in that case your calculations will have to be according to that vat rate only.
For example, if you sell an item at ?100 to a client that attracts vat at 17.5% in that case your vat calculations will need to display the vat rate, i.e. ?17.50 after the product rate and also the total amount of the sale including vat, i.e. ?117.50, the final value of your vat invoice. These amounts must also be calculated and summed up within your vat returns. Similarly any vat already paid on goods or services imported by you into the UK can be claimed back via a vat reclaim form which also has to calculate the vat amount paid. You can easily install a vat accounting software program on your desktop so as to accurately calculate vat on each vat invoice since mistakes won’t be looked at kindly by the hmrc vat department.
Your vat returns will likely need calculations of various vat amounts paid and calculated. These calculations may also differ on the vat scheme that you opt for since the flat rate scheme will call for different calculations as compared to the other schemes. You will additionally need to learn on the way to calculate vat amounts from vat exclusive and vat inclusive prices to get the precise amount of vat.
Accurate calculation of vat is extremely important while selling or buying goods that are governed by vat tax. These amounts will need to be reflected within your purchases, sales, vat returns, and vat refunds too. Your enterprise will operate correctly while hmrc may also remain pleased with you only once your vat calculation is accurate and clear in all your vat documents and books.