Precise vat calculations are a must for perfect vat accounting

If you’re a VAT registered trader in the UK or 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 services and goods, and you need to calculate each vat rate precisely so as to file proper vat returns as well as give the proper amount of vat vatnumbers 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 sell or buy is bound to fall under one such classifications. Many of these goods and services come under the regular vat rate of 17.5% that is slated to rise to 20% from January 4, 2011 onwards. Other goods and services come under the reduced vat rate of 5% while a limited number come under the zero vat rate. There are also certain goods and services like those related to 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 when you know the appropriate vat rate of every of your products and services. For example, if you are selling a set of shoes to your 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 will be ?235. Similarly, let’s say you sell a product for ?50 that draws 5% vat rate then your vat amount on that product will be ?2.50 whilst the total amount inclusive of vat will be ?52.50. It is crucial to understand your basic products or services cost, your vat cost and your total cost including vat so that you can bill your clients at the most effective rates whilst 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’ll have to do this if your services or goods are imported into the UK from any other eu country that has already collected vat on them. In such a case, you should apply for vat reclaim to get back the money already paid in the country of origin. You need to hire an expert vat agent so that probability of any miscalculations are minimized. Your vat agent can also take overall vat calculations in order that all of your vat returns and vat refunds are handled within the stipulated time period and that too without any calculation mistakes. The hmrc vat department offers various vat accounting schemes such as the flat rate scheme, and in such a case different calculation methods will have to be employed.

Although vat isn’t a very complex tax method, you will still require calculations that are able to separate your basic costs from taxes. This will likely permit you to purchase and sell your services and goods after calculating proper profits. As you also have to file regular vat returns and might also need to make an application for vat refunds, precise vat calculations will help you remain on the right side of the vat law.