When you start issuing vat invoices to the clients then accurate vat calculation will help you calculate exact vat rates. Calculating vat rates is quite easy and you will have to display all of your calculations within your vat invoices as well as your vat returns too.
In case you are based in the UK you would then have turned 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. This could lead to issuance of vat invoices by you to all your future clients. Your vat invoice will have to mention your vat number along with vatvalidation vat rates alongside your services or goods which you have sold to the 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 every aspect of vat in the United Kingdom.
There are 14,000 vat classifications provided by hmrc just in case you have trouble in slotting your goods and services in the right classification then you should appoint a professional vat agent with complete knowledge on uk vat rules as well as eu vat rules if 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 reduced 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. Thus, in case a certain product is taxed at 17.5% in that case your calculations will need to be based on that vat rate only.
For example, if you sell an item at ?100 to your client that attracts vat at 17.5% in that case your vat calculations will need to display the vat rate, i.e. ?17.50 after 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 in your vat returns. Similarly any vat already paid on services or goods imported by you into the UK can be claimed back through a vat reclaim form that also has to calculate the vat amount paid. You can easily install a vat accounting software program on your computer so as to accurately calculate vat on each vat invoice since mistakes will not be looked at kindly by the hmrc vat department.
Your vat returns will likely need calculations of various vat amounts paid and calculated. These calculations will also differ on the vat scheme which you choose since the flat rate scheme will call for different calculations when compared to the other schemes. You will also 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 extremely important while buying or selling goods that are subject to vat tax. These amounts will need to be reflected in your purchases, sales, vat returns, and vat refunds too. Your business will operate correctly while hmrc will also remain pleased with you only when your vat calculation is accurate and clear in your vat documents and books.