When you start issuing vat invoices to the 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 your calculations in your vat invoices as well as your vat returns too.
In case you are located in the UK then you would have turned into a VAT registered trader once your taxable sales might have reached the vat threshold figure of 70,000 pounds in the past Year. This could result in issuance of vat invoices by you to all your future clients. Your vat invoice would need to mention your vat number along with www.vatvalidation.com vat rates alongside your goods or services which you have sold to the clients. In order to calculate vat you need to know the classification of the goods and services as decided by HM Revenue and Customs or hmrc vat department that manages every aspect of vat in the UK.
There are 14,000 vat classifications given by hmrc and if you’ve trouble in slotting your products or services in 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 regular rate of 17.5% which will soon increase to 20% from January 4, 2011. There is another reduced rate of 5% that is also applicable on certain children?s goods and other services and also a zero vat rate on specific goods and services. 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.
As an example, if you sell an item at ?100 to your client that attracts vat at 17.5% then 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 will also need to be calculated and summed up within your vat returns. Similarly any vat already paid on services or goods imported by you into the UK can be claimed back via a vat reclaim form which also needs to calculate the vat amount paid. You can easily put in 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 also need calculations of varied vat amounts paid and calculated. These calculations may also differ on the vat scheme that you choose because the flat rate scheme will require different calculations as compared to the other schemes. You will also need to read on the way 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 buying or selling items that are subject to vat tax. These amounts will have to be reflected in your purchases, sales, vat returns, and vat refunds too. Your business will operate correctly while hmrc will also remain happy with you only when your vat calculation is accurate and clear in your vat documents and books.