Precise vat calculations are a must for perfect vat accounting

If you’re a VAT registered trader in the UK or any 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 need to calculate each vat rate precisely so as to file proper vat returns and also pay the correct amount of vat vatnumbers 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 services and goods into 14,000 classifications. Thus, any products or services that you sell or buy is likely to fall under one such classifications. Most of these goods and services fall under the regular vat rate of 17.5% that is slated to rise to 20% from January 4, 2011 onwards. Other goods and services fall under the reduced vat rate of 5% while a limited number fall under the zero vat rate. There are also certain services and goods such as those associated with charitable events, among others that come under the vat exempt scheme where no vat can be added or claimed back.

Your vat calculations will begin once you know the appropriate vat rate of each of your products and services. For example, if you sell a set of shoes to the 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, let’s say you sell an item for ?50 that attracts 5% vat rate then your vat amount on that product is going to be ?2.50 whilst 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 inclusive of vat so that you can bill your customers in the most effective rates whilst filing your vat returns without making any calculation errors.

Calculating the right amount of vat can also be vital when you make application for vat refunds. You’ll have to do this if your goods or services are imported into 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 a specialist vat agent so that probability 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 offers various vat accounting schemes including the flat rate scheme, and in this type of case different calculation methods will need to be employed.

Although vat is not a very complex tax method, you still require calculations that manage to separate your basic costs from taxes. This will likely allow you to trade your services and goods after calculating proper profits. As you also have to file regular vat returns and might also need to apply for vat refunds, precise vat calculations will help you remain on the appropriate side of the vat law.