Precise vat calculations undoubtedly are a must for perfect vat accounting

If you’re a VAT registered trader in the United Kingdom 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 goods and services, and you also have to calculate each vat rate precisely so as to file proper vat returns as well as pay the correct amount of vat tax.

In the UK, all vat rules are issued by 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 that you purchase or sell is likely to fall under one of these classifications. Most of these services and goods fall under the regular vat rate of 17.5% which is slated to rise to 20% from January 4, 2011 onwards. Other goods and services fall under the lower vat rate of 5% while a limited number come under the zero vat rate. Additionally, there are certain goods and services such as those associated with charitable events, amongst others that fall under the vat exempt scheme where no vat is usually added or claimed back.

Your vat calculations will start once you know the appropriate vat rate of each one of the products and services. For example, if you sell a set of shoes to your customers for ?200 without vat then at 17.5% vat, your vat amount will 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 including vat will be ?52.50. It is very important to know your basic products or services cost, your vat cost as well as your total cost including vat so that you can bill your clients at the best possible rates whilst filing your vat returns without creating any calculation errors.

Calculating the right amount of vat can also be vital whenever you make application for vat refunds. You would need to do this in case your services or goods are imported into the UK from the other eu country that has already collected vat on them. In such a case, you would need to make application for vat reclaim for getting your money back already paid in the nation of origin. You should hire a specialist vat agent so that probability of any miscalculations are minimized. Your vat agent could also take overall vat calculations in order that all of your vat returns and vat refunds are handled in the stipulated time frame and that too without 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 have to be employed.

Although vat is not a very complex tax method, you will still require calculations that manage to separate your basic costs from taxes. This will likely permit you to purchase and sell your goods and services after calculating proper profit margins. As you also have to file regular vat returns and may also have to make an application for vat refunds, precise vat calculations will help you stay on the right side of the vat law.