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 that have embraced vat use various vat rates on different services and goods, and you also have to calculate each vat rate precisely in order to file proper vat returns as well as 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 services and goods into 14,000 classifications. Thus, any products or services which you sell or buy is bound to come under one of these classifications. Most of these services and goods fall under the regular vat rate of 17.5% which is slated to increase to 20% from January 4, 2011 onwards. Other services and goods come under the reduced vat rate of 5% while a select few come under the zero vat rate Additionally, there are certain services and goods like those related to 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 when you know the correct vat rate of every of the 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 while the total amount of your vat invoice including vat will be ?235. Similarly, if you sell an item for ?50 that draws 5% vat rate then your vat amount on that product will 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 and your total cost including vat to be able to bill your clients in the best possible rates while also filing your vat returns without making any calculation errors.

Calculating the right amount of vat is also vital whenever you make application for vat refunds continue. You’ll have to do that in case your goods or services are imported to 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 should hire a specialist vat agent to ensure that probability of any miscalculations are minimized. Your vat agent can also take overall vat calculations in order that all your vat returns and vat refunds are handled within 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 isn’t a very complex tax method, you 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 profits. Since you also have to file regular vat returns and might also have to apply for vat refunds, precise vat calculations will allow you to remain on the right side of the vat law.