Once you start issuing vat invoices to the clients then accurate vat calculation will help you calculate exact vat rates. Calculating vat rates is very easy and you will need to display all of your calculations within your vat invoices and your vat returns too.
If you are based in the UK then you would have turned into a VAT registered trader once your taxable sales would have reached the vat threshold figure of 70,000 pounds within the past Year vatnumbersearch.com. This would lead to issuance of vat invoices by you to all of your future clients. Your vat invoice would need to mention your vat number along with 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 the products or services as decided by HM Revenue and Customs or hmrc vat department that manages all aspects of vat in the United Kingdom.
There are actually 14,000 vat classifications provided by hmrc and if you have trouble in slotting your products or services in the right classification you then should appoint a professional 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% that is also applicable on certain children?s goods as well as other services along with a zero vat rate on specific services and goods our website. Thus, in case a certain product is taxed at 17.5% then your calculations will need to be according to that vat rate only.
For example, if you sell an item at ?100 to your client that draws vat at 17.5% then 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, 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 might be claimed back through a vat reclaim form which also needs to calculate the vat amount paid. It is possible to install a vat accounting software package on your desktop in order to accurately calculate vat on each vat invoice since mistakes will not be viewed kindly by the hmrc vat department.
Your vat returns will likely need calculations of varied vat amounts paid and calculated. These calculations may also differ on the vat scheme which you choose since the flat rate scheme will require different calculations when compared to the other schemes. You will additionally need to learn on the way to calculate vat amounts from vat exclusive and vat inclusive prices so as to get the exact amount of vat.
Accurate calculation of vat is extremely important while selling or buying items that are subject to vat tax. These amounts will have to be reflected within your purchases, sales, vat returns, and vat refunds too. Your enterprise will operate correctly while hmrc will also remain pleased with you only once your vat calculation is accurate and clear in all your vat documents and books.