Once you start issuing vat invoices to the clients then accurate vat calculation can help you calculate exact vat rates. Calculating vat rates is quite simple and you will have to display all your calculations within your vat invoices and your vat returns too.
If you are based in the UK you would then have converted 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 could result in issuance of vat invoices by you to all your future clients. Your vat invoice would need to mention your vat number along with vat rates next to your goods or services that you have sold to your clients. In order to calculate vat you need to know the classification of your 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 and if you have trouble in slotting your goods and services within the right classification then you certainly should appoint a professional 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 UK vat is spread into three slabs, namely the standard rate of 17.5% that will soon increase to 20% from January 4, 2011. There's another reduced rate of 5% that is also applicable on certain children?s goods and other services along with a zero vat rate on specific services and goods my blog. Thus, in case a certain product is taxed at 17.5% then your calculations will have to be based on that vat rate only.
As an example, let's say you sell a product at ?100 to a client that attracts 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 as well as the total quantity 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 goods or services imported by you to the UK might be claimed back through a vat reclaim form that also needs to calculate the vat amount paid. It is possible to put in a vat accounting software package on your desktop 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 various vat amounts paid and calculated. These calculations will also differ on the vat scheme that you opt for since the flat rate scheme will require different calculations when 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 so as to get the exact 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 business will operate correctly while hmrc will also remain happy with you only once your vat calculation is accurate and clear in your vat documents and books.