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Precise vat calculations undoubtedly are a must for perfect vat accounting


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If you are a VAT registered trader in the UK or 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 goods and services, and you have to calculate each vat rate precisely in order to file proper vat returns as well as give 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 product or service which you purchase or sell is bound to fall under one of these classifications. Most of these goods and services come under the regular vat rate of 17.5% that is slated to rise to 20% from January 4, 2011 onwards. Other services and goods come under the lower vat rate of 5% while a select few come under the zero vat rate. There are also certain services and goods such as those related to charitable events, among others that come under the vat exempt scheme where no vat is usually added or claimed back.

Your vat calculations will start once you know the appropriate vat rate of every 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 will be ?35 whilst the total amount of your vat invoice including vat is going to be ?235. Similarly, if you sell an item for ?50 that draws 5% vat rate then the vat amount on that product will be ?2.50 while the total amount inclusive of vat is going to be ?52.50. It is very important to know your basic product or service cost, your vat cost as well as your total cost including vat to be able to bill your customers in the best possible rates whilst filing your vat returns without creating any calculation errors.

Calculating the correct amount of vat can also be vital when you make application for vat refunds. You would need to do this if your goods or services are imported into the UK from any other eu country which has already collected vat on them. When this occurs, you would need to apply for vat reclaim to get your money back already paid in the nation of origin. You should hire an expert vat agent to ensure that probability of any miscalculations are minimized. Your vat agent could also take over all vat calculations in order that all of your vat returns and vat refunds are handled in the stipulated time period and that too without any calculation mistakes. The hmrc vat department also offers various vat accounting schemes such as the flat rate scheme, and in such a case different calculation methods will have 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 permit you to trade your goods and services after calculating proper profit margins. As you will also need to file regular vat returns and may also need to apply for vat refunds, precise vat calculations will allow you to remain on the right side of the vat law.