Precise vat calculations undoubtedly are a must for perfect vat accounting

If you’re a VAT registered trader in the UK or any other vat-enabled eu country then precise vat calculations are a must for perfect vat accounting. All countries that have embraced vat use various vat rates on different services and goods, and you also have to calculate each vat rate precisely in order to file proper vat returns as well as give the proper amount of vat tax.

In the United Kingdom, 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 product or service which you purchase or sell is bound to come under one such classifications. Many of these services and goods fall under the standard vat rate of 17.5% which is slated to increase to 20% from January 4, 2011 onwards. Other services and goods come under the reduced vat rate of 5% while a select few fall under the zero vat rate vat registration number. Additionally, there are 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 once you know the appropriate vat rate of every of the goods and services. For example, if you sell a pair of shoes to the customers for ?200 exclusive of vat then at 17.5% vat, your vat amount is going to be ?35 whilst 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 attracts 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 very important to understand your basic products or services cost, your vat cost and your total price including vat to be able to bill your customers in the best possible rates whilst filing your vat returns without creating any calculation errors.

Calculating the correct amount of vat can also be vital when you make application for vat refunds additional info. You would need to do that in case your services or goods are imported into 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 your money back already paid in the country of origin. You should hire a specialist vat agent to ensure that chances of any miscalculations are minimized. Your vat agent could also take overall vat calculations in order that all your vat returns and vat refunds are handled within the stipulated time frame and that too without any calculation mistakes. The hmrc vat department also offers various vat accounting schemes such as the flat rate scheme, and in such a case different calculation methods will need to be employed.

Although vat is not a very complex tax method, you still require calculations that manage to separate your basic costs from taxes. This will allow 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 make an application for vat refunds, precise vat calculations will allow you to remain on the right side of the vat law.