Once you start issuing vat invoices to the 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 in 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 vat number search. This would lead to issuance of vat invoices by you to all of your future clients. Your vat invoice would need to mention your vat number together with vat rates next to your goods or services that you have sold to your clients. To be able to calculate vat you need to know the classification of the products or services as decided by HM Revenue and Customs or hmrc vat department that manages every aspect of vat in the UK.
There are actually 14,000 vat classifications given by hmrc just in case you’ve trouble in slotting your products or services within the right classification you then should appoint a professional vat agent with complete knowledge on uk vat rules and even eu vat rules if you import goods from any eu country. In the United Kingdom vat is spread into three slabs, namely the standard 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 services and goods continue reading. Thus, in case a certain product is taxed at 17.5% then your calculations will have to be according to that vat rate only.
For example, if you sell an item at ?100 to a client that draws vat at 17.5% then your vat calculations will need to display the vat rate, i.e. ?17.50 after the product rate as well as the total amount of the sale including vat, i.e. ?117.50, the final value of your vat invoice. These amounts will also need to be calculated and summed up in 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 desktop so as to accurately calculate vat on each vat invoice since mistakes will not 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 opt for because the flat rate scheme will require different calculations as compared to the other schemes. You will additionally need to learn on how 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 selling or buying goods that are subject to vat tax. These amounts will have 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 when your vat calculation is accurate and clear in all your vat documents and books.