Precise vat calculations undoubtedly are a must for perfect vat accounting

If you are a VAT registered trader in the United Kingdom or other vat-enabled eu country then precise vat calculations really 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 in order to file proper vat returns and also give the correct amount of vat 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 product or service that you sell or buy is likely to fall under one of these classifications. Many of these goods and services fall under the regular vat rate of 17.5% which is slated to increase to 20% from January 4, 2011 onwards. Other goods and services fall under the reduced vat rate of 5% while a select few come under the zero vat rate There are also certain goods and services like those related to charitable events, amongst others that fall under the vat exempt scheme where no vat is usually added or claimed back.

Your vat calculations will begin when you know the appropriate vat rate of each one of the products and services. For instance, if you are selling a pair 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 is going to be ?235. Similarly, if you sell an item for ?50 that attracts 5% vat rate then the 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 products or services cost, your vat cost as well as your total cost including vat so that you can bill your customers in the best possible rates while also filing your vat returns without making any calculation errors.

Calculating the correct amount of vat is also vital whenever you apply for vat refunds useful source. You’ll have to do that in case your goods or services are imported to the UK from any other eu country which has already collected vat on them. In such a case, you should apply for vat reclaim for getting your money back already paid in the country of origin. You need to hire a specialist vat agent so that chances of any miscalculations are minimized. Your vat agent can also take overall vat calculations so that all of your vat returns and vat refunds are handled in the stipulated time frame and that too without any calculation mistakes. The hmrc vat department also offers various vat accounting schemes including 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 allow you to purchase and sell your goods and services after calculating proper profit margins. Since 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 stay on the right side of the vat law.