When you start issuing vat invoices to your clients then accurate vat calculation will help you calculate exact vat rates. Calculating vat rates is very simple and you will need to display all your calculations within your vat invoices as well as your vat returns too.
If you are located in the UK then you would have converted into a VAT registered trader as soon as your taxable sales would have reached the vat threshold figure of 70,000 pounds in the past Year http://vatnumbersearch.com. This could 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 the clients. In order 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 given by hmrc just in case you have trouble in slotting your goods and services in the right classification you then should appoint an expert vat agent with complete knowledge on uk vat rules and even 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% which will soon increase to 20% from January 4, 2011. There is another lower rate of 5% which is also applicable on certain children?s goods as well as other services along with a zero vat rate on specific goods and services your domain name. Thus, if a certain product is taxed at 17.5% in that case your calculations will need to be according to that vat rate only.
For example, let’s say you sell an item at ?100 to your client that draws vat at 17.5% in that case your vat calculations will have to display the vat rate, i.e. ?17.50 following the product rate and also the total amount of the sale including vat, i.e. ?117.50, which is 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 to the UK might be claimed back via a vat reclaim form that also needs to calculate the vat amount paid. You can easily put in a vat accounting software package on your computer in order to accurately calculate vat on each vat invoice since mistakes won’t be viewed kindly by the hmrc vat department.
Your vat returns will also need calculations of varied vat amounts paid and calculated. These calculations may also differ on the vat scheme which you choose because the flat rate scheme will require different calculations as compared to the other schemes. You will additionally need to read on the way to calculate vat amounts from vat exclusive and vat inclusive prices to get the precise amount of vat.
Accurate calculation of vat is very important while selling or buying goods that are governed by vat tax. These amounts will need to be reflected within your purchases, sales, vat returns, and vat refunds too. Your enterprise will operate correctly while hmrc may also remain pleased with you when your vat calculation is accurate and clear in all your vat documents and books.