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Accurate vat calculation can help you calculate exact vat rates


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When 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 located in the UK then you would have turned into a VAT registered trader as soon as your taxable sales might have reached the vat threshold figure of 70,000 pounds within the past Year. This could lead to issuance of vat invoices by you to all your future clients. Your vat invoice would need to mention your vat number along with vat rates next to your goods or services that you have sold to the clients. In order to calculate vat you need to 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 United Kingdom.

There are actually 14,000 vat classifications provided by hmrc just in case you have trouble in slotting your products or services in the right classification then you should appoint an expert vat agent with complete knowledge on uk vat rules and even eu vat rules if you import goods from any eu country. In the United Kingdom vat is spread into three slabs, namely the standard rate of 17.5% that 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 and other services and also a zero vat rate on specific services and goods. Thus, in case a certain product is taxed at 17.5% in that case your calculations will have to be according to that vat rate only.

For 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, the final value of your vat invoice. These amounts will also need to be calculated and summed up in your vat returns. Similarly any vat already paid on services or goods imported by you to the UK can be claimed back via a vat reclaim form that also needs to calculate the vat amount paid. It is possible to install a vat accounting software package on your desktop so as 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 also need calculations of varied vat amounts paid and calculated. These calculations will also differ on the vat scheme that you opt for since the flat rate scheme will require different calculations when compared to the other schemes. You will additionally need to read on how to calculate vat amounts from vat exclusive and vat inclusive prices to get the precise amount of vat.

Accurate calculation of vat is very important while buying or selling items that are subject to vat tax. These amounts will have to be reflected within your purchases, sales, vat returns, and vat refunds too. Your business will operate correctly while hmrc will also remain happy with you only when your vat calculation is accurate and clear in your vat documents and books.