If you are a VAT registered trader in the United Kingdom or other vat-enabled eu country then precise vat calculations are a must for perfect vat accounting. All countries that have embraced vat use various vat rates on different goods and services, and you also have to calculate each vat rate precisely in order to file proper vat returns and also pay the correct 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 goods and services into 14,000 classifications. Thus, any products or services that you purchase or sell is bound to fall under one such classifications. Many of these services and goods come under the standard vat rate of 17.5% which is slated to rise to 20% from January 4, 2011 onwards. Other services and goods come under the reduced vat rate of 5% while a select few fall under the zero vat rate https://vatregistrationnumber.com. Additionally, there are certain goods and services such as those associated with charitable events, amongst others that fall under the vat exempt scheme where no vat may be added or claimed back.
Your vat calculations will begin once you know the correct vat rate of every of your products and services. For example, if you are selling a set of shoes to your customers for ?200 without 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, let’s say you sell an item for ?50 that draws 5% vat rate then the vat amount on that product will be ?2.50 whilst the total amount inclusive of vat will be ?52.50. It is crucial to understand your basic products or services cost, your vat cost and your total price including vat to be able to bill your customers at the best possible rates while also filing your vat returns without creating any calculation errors.
Calculating the correct amount of vat is also vital whenever you make application for vat refunds recommended reading. You would need to do this if your goods or services are imported into the UK from the other eu country that has already collected vat on them. When this occurs, you would need to apply for vat reclaim for getting back the money already paid in the nation of origin. You need to hire a specialist vat agent so that probability of any miscalculations are minimized. Your vat agent could also take overall vat calculations so that all your vat returns and vat refunds are handled in the stipulated time frame and that too without calculation mistakes. The hmrc vat department also offers various vat accounting schemes including the flat rate scheme, and in this type of case different calculation methods will need to be employed.
Although vat isn’t a very complex tax method, you will still require calculations that are able to separate your basic costs from taxes. This will allow you to trade your services and goods after calculating proper profit margins. Since you will also need to file regular vat returns and might also have to apply for vat refunds, precise vat calculations will allow you to remain on the right side of the vat law.