If you’re a VAT registered trader in the UK or other vat-enabled eu country then precise vat calculations really are a must for perfect vat accounting. All countries that have embraced vat use various vat rates on different goods and services, and you have to calculate each vat rate precisely so as to file proper vat returns and also give the correct 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 services and goods into 14,000 classifications. Thus, any products or services which you sell or buy is bound to fall under one such classifications. Many of these goods and services come under the standard vat rate of 17.5% which is slated to increase to 20% from January 4, 2011 onwards. Other services and goods fall under the lower vat rate of 5% while a limited number come under the zero vat rate https://vatregistrationnumber.com. There are also certain services and goods such as those associated with charitable events, among others that fall under the vat exempt scheme where no vat is usually added or claimed back.
Your vat calculations will begin once you know the appropriate vat rate of every of the goods and services. For example, if you sell a set of shoes to your 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 will be ?235. Similarly, if you sell an item for ?50 that attracts 5% vat rate then your vat amount on that product is going to be ?2.50 while the total amount inclusive of vat is going to be ?52.50. It is crucial to understand your basic product or service cost, your vat cost and your total cost including vat to be able to bill your customers in the best possible rates while also filing your vat returns without making any calculation errors.
Calculating the right amount of vat is also vital whenever you make application for vat refunds useful source. You’ll have to do this if your goods or services are imported to the UK from any other eu country that has already collected vat on them. When this occurs, you would need to make application for vat reclaim to get back the money already paid in the nation of origin. You need to hire an expert vat agent to ensure that probability of any miscalculations are minimized. Your vat agent could also take overall vat calculations so that all 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 this type of case different calculation methods will need 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 permit you to trade your services and goods after calculating proper profit margins. As you will also need to file regular vat returns and may also need to apply for vat refunds, precise vat calculations will allow you to remain on the appropriate side of the vat law.