When you start issuing vat invoices to the clients then accurate vat calculation can help you calculate exact vat rates. Calculating vat rates is very simple and you will have to display all of your calculations in your vat invoices as well as your vat returns too.
If you are based in the UK you would then have converted into a VAT registered trader as soon as your taxable sales would have reached the vat threshold figure of 70,000 pounds in the past 12 months www.vatnumbersearch.com. This could lead to issuance of vat invoices by you to all of your future clients. Your vat invoice will have to mention your vat number along with vat rates next to your services or goods that you have sold to your clients. In order to calculate vat you should know the classification of your products or services as decided by HM Revenue and Customs or hmrc vat department that manages all aspects of vat in the UK.
There are actually 14,000 vat classifications provided by hmrc just in case you’ve trouble in slotting your goods and services within the right classification you then should appoint a professional vat agent with complete knowledge on uk vat rules and even eu vat rules if you import goods from any eu country. In the United Kingdom 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% that is also applicable on certain children?s goods as well as other services along with a zero vat rate on specific goods and services full article. Thus, in case a certain product is taxed at 17.5% in that case your calculations will have to be based on that vat rate only.
For example, if you sell a product 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 following the product rate and also the total amount of the sale including vat, i.e. ?117.50, which is 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 to the UK can be claimed back via a vat reclaim form which also needs 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 viewed kindly by the hmrc vat department.
Your vat returns will also need calculations of various vat amounts paid and calculated. These calculations will also differ on the vat scheme which you opt for since the flat rate scheme will require different calculations as compared to the other schemes. You will also need to learn on how to calculate vat amounts from vat exclusive and vat inclusive prices to get the exact amount of vat.
Accurate calculation of vat is extremely important while buying or selling items that are governed by vat tax. These amounts will need to be reflected within your purchases, sales, vat returns, and vat refunds too. Your business will operate correctly while hmrc may also remain happy with you when your vat calculation is accurate and clear in all your vat documents and books.