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 really are a must for perfect vat accounting. All countries that have embraced vat use various vat rates on different services and goods, 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 vat numbers 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 product or service that you sell or buy is bound to fall under one such classifications. Most of these services and goods fall under the regular vat rate of 17.5% that is slated to increase to 20% from January 4, 2011 onwards. Other goods and services fall under the lower vat rate of 5% while a select few fall under the zero vat rate. There are also certain services and goods like those associated with charitable events, among others that come under the vat exempt scheme where no vat may be added or claimed back.

Your vat calculations will start once you know the correct vat rate of every of your products and services. For instance, if you sell a pair of shoes to the customers for ?200 exclusive of vat then at 17.5% vat, your vat amount will be ?35 while the total amount of your vat invoice including vat is going to be ?235. Similarly, let’s say you sell a product for ?50 that attracts 5% vat rate then your vat amount on that product is going to be ?2.50 whilst 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 price inclusive of vat so that you can bill your customers at the best possible rates while also filing your vat returns without creating any calculation errors.

Calculating the right amount of vat can also be vital when you apply for vat refunds. You’ll have to do this in case your goods or services are imported into the UK from any other eu country that has already collected vat on them. When this occurs, you would need to apply for vat reclaim for getting your money back already paid in the nation of origin. You need to hire an expert vat agent so that chances 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 within 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 such a case different calculation methods will need to be employed.

Although vat is not a very complex tax method, you will still require calculations that are able to separate your basic costs from taxes. This will permit you to purchase and sell your goods and services after calculating proper profits. As you will also need to file regular vat returns and might also need to apply for vat refunds, precise vat calculations will help you stay on the appropriate side of the vat law.