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Precise vat calculations are a must for perfect vat accounting

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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 services and goods, and you also have to calculate each vat rate precisely in order to file proper vat returns as well as pay the proper 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 product or service which you sell or buy is bound to come under one of these classifications. Most of these services and goods come under the regular vat rate of 17.5% that is slated to rise to 20% from January 4, 2011 onwards. Other goods and services come under the reduced vat rate of 5% while a limited number fall under the zero vat rate vat registration number. Additionally, there are certain goods and services like 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 start once you know the correct vat rate of each of your goods and services. For example, if you are selling 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 attracts 5% vat rate then the vat amount on that product will be ?2.50 while the total amount including vat is going to be ?52.50. It is very important to understand your basic product or service cost, your vat cost and your total price inclusive of vat so that you can bill your clients in the best possible rates whilst filing your vat returns without creating any calculation errors.

Calculating the right amount of vat is also vital when you make application for vat refunds look at this. You’ll have to do that in case your services or goods are imported into the UK from the other eu country which has already collected vat on them. In such a case, you should make application for vat reclaim to get back the money already paid in the nation of origin. You should hire a specialist vat agent so that chances of any miscalculations are minimized. Your vat agent can also take over all 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 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 still require calculations that manage to separate your basic costs from taxes. This will permit you to purchase and sell your goods and services after calculating proper profits. As you will also need to file regular vat returns and might also need to make an application for vat refunds, precise vat calculations will help you remain on the right side of the vat law.