Precise vat calculations are a must for perfect vat accounting

If you are a VAT registered trader in the United Kingdom or any 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 so as to file proper vat returns and also give the proper amount of vat 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 services and goods into 14,000 classifications. Thus, any products or services which you purchase or sell is bound to come under one of these classifications. Many of these services and goods fall under the standard vat rate of 17.5% that is slated to rise to 20% from January 4, 2011 onwards. Other services and goods 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 such as those associated with charitable events, among others that fall under the vat exempt scheme where no vat is usually added or claimed back.

Your vat calculations will begin when you know the correct vat rate of each one of your goods and services. For instance, if you are selling a pair of shoes to the customers for ?200 exclusive of vat then at 17.5% vat, your vat amount will be ?35 whilst the total amount of your vat invoice including vat is going to be ?235. Similarly, if you sell an item for ?50 that attracts 5% vat rate then the vat amount on that product will be ?2.50 while the total amount including vat is going to be ?52.50. It is crucial to know your basic product or service cost, your vat cost and your total price including vat to be able to bill your clients in the most effective rates whilst filing your vat returns without creating any calculation errors.

Calculating the right amount of vat is also vital when you apply for vat refunds. You would need to do that if your services or goods are imported to the UK from the other eu country which has already collected vat in it. When this occurs, you should apply for vat reclaim for getting back the money already paid in the country of origin. You need to hire a specialist vat agent to ensure that chances of any miscalculations are minimized. Your vat agent could also take overall vat calculations so that all your vat returns and vat refunds are handled in the stipulated time frame and that too without any calculation mistakes. The hmrc vat department also offers various vat accounting schemes such as the flat rate scheme, and in this type of case different calculation methods will have 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 trade your goods and services after calculating proper profits. As you will also need to file regular vat returns and may also have to make an application for vat refunds, precise vat calculations will help you remain on the appropriate side of the vat law.