Precise vat calculations undoubtedly are a must for perfect vat accounting

If you are a VAT registered trader in the UK or other vat-enabled eu country then precise vat calculations are a must for perfect vat accounting. All countries which have embraced vat use various vat rates on different goods and services, and you also need to calculate each vat rate precisely in order to file proper vat returns and also pay the correct amount of vat tax.

In the United Kingdom, all vat rules are issued by HM Revenue and Customs or hmrc vat department. Hmrc has classified all taxable and vat exempt goods and services into 14,000 classifications. Thus, any products or services which you purchase or sell is bound to come under one of these classifications. Most of these goods and services fall under the standard vat rate of 17.5% that is slated to increase to 20% from January 4, 2011 onwards. Other goods and services come under the reduced vat rate of 5% while a select few come under the zero vat rate. There are also certain services and goods like those associated with charitable events, among others that fall under the vat exempt scheme where no vat is usually added or claimed back.

Your vat calculations will begin once you know the appropriate vat rate of each of the products and services. For example, if you sell a set of shoes to the customers for ?200 without vat then at 17.5% vat, your vat amount is going to be ?35 whilst the total amount of your vat invoice including vat will be ?235. Similarly, let’s say you sell an item for ?50 that draws 5% vat rate then your vat amount on that product is going to be ?2.50 while the total amount including vat will be ?52.50. It is very important to understand your basic products or services cost, your vat cost and your total price including vat so that you can bill your clients at the most effective rates while also filing your vat returns without making 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 to the UK from the other eu country that has already collected vat on them. In such a case, you would need to apply for vat reclaim to get your money back already paid in the country of origin. You need to hire a specialist vat agent to ensure that probability of any miscalculations are minimized. Your vat agent could also take over all vat calculations so that all of your vat returns and vat refunds are handled in the stipulated time frame and that too without calculation mistakes. The hmrc vat department offers various vat accounting schemes such as the flat rate scheme, and in such a case different calculation methods will need 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 likely allow you to purchase and sell your services and goods after calculating proper profits. Since you will also need to file regular vat returns and may also have to make an application for vat refunds, precise vat calculations will allow you to remain on the appropriate side of the vat law.