If you are a VAT registered trader in the UK or any other vat-enabled eu country then precise vat calculations really are a must for perfect vat accounting. All countries which have embraced vat use various vat rates on different services and goods, and you have to calculate each vat rate precisely in order to file proper vat returns and also give the correct amount of vat www.vatnumbers.com tax.
In the UK, 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 sell or buy is likely to come under one of these classifications. Many 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 fall under the lower vat rate of 5% while a limited number come under the zero vat rate. Additionally, there are certain goods and services such as those related to charitable events, among others that come under the vat exempt scheme where no vat can be added or claimed back.
Your vat calculations will start when you know the appropriate vat rate of each of the products and services. For example, if you sell a set of shoes to your 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 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 will be ?2.50 whilst the total amount including vat will be ?52.50. It is crucial to understand your basic products or services cost, your vat cost and your total cost including vat to be able to bill your clients at the best possible rates whilst filing your vat returns without creating any calculation errors.
Calculating the right amount of vat is also vital whenever you make application for vat refunds. You would need to do that in case your services or goods are imported into the UK from the other eu country which has already collected vat in it. When this occurs, you should make application for vat reclaim for getting back the money already paid in the nation of origin. You need to hire an expert vat agent to ensure that probability of any miscalculations are minimized. Your vat agent can also take over all vat calculations in order that all of your vat returns and vat refunds are handled in the stipulated time period and that too without any calculation mistakes. The hmrc vat department 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 is not a very complex tax method, you still require calculations that manage to separate your basic costs from taxes. This will likely allow you to trade your services and goods after calculating proper profit margins. As you also have to file regular vat returns and may also have to make an application for vat refunds, precise vat calculations will allow you to stay on the right side of the vat law.