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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 easy and you will have to display all of your calculations within your vat invoices as well as your vat returns too.

If you are located in the UK you would then have converted into a VAT registered trader once your taxable sales would have reached the vat threshold figure of 70,000 pounds in the past 12 months. 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 together with vat validation vat rates alongside your goods or services that you have sold to your clients. To be able to calculate vat you should know the classification of your goods and services as decided by HM Revenue and Customs or hmrc vat department that manages all aspects of vat in the UK.

There are 14,000 vat classifications provided by hmrc and if you’ve trouble in slotting your products or services within the right classification you then should appoint an expert vat agent with complete knowledge on uk vat rules as well as eu vat rules in the event you import goods from any eu country. In the United Kingdom vat is spread into three slabs, namely the regular rate of 17.5% that will soon increase to 20% from January 4, 2011. There is another reduced rate of 5% which is also applicable on certain children?s goods and other services along with a zero vat rate on specific goods and services. Thus, if a certain product is taxed at 17.5% in that case your calculations will need to be based on that vat rate only.

For example, let’s say you sell an item 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 and also the total amount of the sale including vat, i.e. ?117.50, which is the final value of your vat invoice. These amounts must also be calculated and summed up within your vat returns. Similarly any vat already paid on services or goods imported by you into the UK can be claimed back through a vat reclaim form that also has to calculate the vat amount paid. You can easily put in a vat accounting software package on your desktop in order 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 likely need calculations of varied vat amounts paid and calculated. These calculations will also differ on the vat scheme that you choose since the flat rate scheme will require different calculations as compared to the other schemes. You will also need to learn 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 extremely important while buying or selling items that are subject to vat tax. These amounts will need to be reflected in your purchases, sales, vat returns, and vat refunds too. Your business will run smoothly while hmrc will also remain happy with you when your vat calculation is accurate and clear in your vat documents and books.