Once you start issuing vat invoices to your clients then accurate vat calculation can help you calculate exact vat rates. Calculating vat rates is very simple and you will need to display all your calculations within your vat invoices as well as your vat returns too.
In case you are based in the UK then you would have turned 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. This could result in issuance of vat invoices by you to all your future clients. Your vat invoice will have to mention your vat number along with vatvalidation.com vat rates next to your goods or services which you have sold to your clients. To be able to calculate vat you should know the classification of the goods and 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 and if you have 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 in the event you import goods from any eu country. In the United Kingdom vat is spread into three slabs, namely the standard rate of 17.5% which will soon increase to 20% from January 4, 2011. There’s another reduced 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 services and goods. Thus, if a certain product is taxed at 17.5% then your calculations will have to be according to that vat rate only.
As an example, if you sell a product at ?100 to a client that attracts vat at 17.5% in that case your vat calculations will have to display the vat rate, i.e. ?17.50 after the product rate as well as 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 into the UK might be claimed back through a vat reclaim form that also has to calculate the vat amount paid. You can easily put in a vat accounting software program on your computer in order 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 likely 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 call for different calculations as compared to the other schemes. You will additionally need to learn on the way to calculate vat amounts from vat exclusive and vat inclusive prices to get the exact amount of vat.
Accurate calculation of vat is very important while selling or buying goods that are governed by vat tax. These amounts will need to be reflected within your purchases, sales, vat returns, and vat refunds too. Your enterprise will run smoothly while hmrc will also remain pleased with you only when your vat calculation is accurate and clear in your vat documents and books.