Precise vat calculations undoubtedly are a must for perfect vat accounting

If you’re a VAT registered trader in the United Kingdom or any 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 in order to file proper vat returns and also give the correct amount of vat tax.

In the UK, all vat rules are from 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 purchase or sell is likely to come under one such classifications. Most of these goods and services fall under the standard vat rate of 17.5% which is slated to rise to 20% from January 4, 2011 onwards. Other services and goods come under the reduced vat rate of 5% while a limited number come under the zero vat rate. There are also certain services and goods like those associated with charitable events, among others that fall under the vat exempt scheme where no vat can be added or claimed back.

Your vat calculations will begin once you know the correct vat rate of each one of the products and services. For instance, if you sell a pair of shoes to the customers for ?200 without vat then at 17.5% vat, your vat amount will be ?35 while the total amount of your vat invoice including vat is going to be ?235. Similarly, let’s say you sell an item for ?50 that draws 5% vat rate then the vat amount on that product is going to be ?2.50 while the total amount including vat will be ?52.50. It is crucial to understand your basic product or service cost, your vat cost as well as your total price inclusive of vat so that you can bill your customers at the best possible rates while also filing your vat returns without making any calculation errors.

Calculating the right amount of vat is also vital when you apply for vat refunds. You would need to do that if your services or goods are imported to the UK from the other eu country that has already collected vat on them. In such a case, you should make application for vat reclaim for getting back the money already paid in the country of origin. You need to hire a specialist vat agent so that chances of any miscalculations are minimized. Your vat agent could also take over all vat calculations in order that all of your vat returns and vat refunds are handled within 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 isn’t a very complex tax method, you will still require calculations that manage to separate your basic costs from taxes. This will likely permit you to trade your goods and services after calculating proper profit margins. Since you also have to file regular vat returns and might also need to apply for vat refunds, precise vat calculations will allow you to stay on the appropriate side of the vat law.