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 are a must for perfect vat accounting. All countries that 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 as well as give the correct amount of vat tax.

In the UK, all vat rules are from 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 product or service which you sell or buy is likely to come under one such classifications. Many of these services and goods come under the regular vat rate of 17.5% that is slated to rise to 20% from January 4, 2011 onwards. Other goods and services come under the reduced vat rate of 5% while a limited number come under the zero vat rate There are also certain services and goods such as those related to charitable events, among others that fall under the vat exempt scheme where no vat is usually added or claimed back.

Your vat calculations will start when you know the correct vat rate of every of the goods and services. For example, if you sell 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 will be ?235. Similarly, if you sell a product for ?50 that attracts 5% vat rate then the vat amount on that product is going to be ?2.50 while the total amount including vat will be ?52.50. It is crucial to know your basic products or services cost, your vat cost and your total price including vat so that you can bill your customers in the most effective rates while also filing your vat returns without making any calculation errors.

Calculating the correct amount of vat is also vital whenever you make application for vat refunds click to read more. You would need to do that in case your services or goods are imported into the UK from the other eu country that has already collected vat on them. When this occurs, you would need to make application for vat reclaim to get your money back already paid in the nation of origin. You need to hire a specialist vat agent to ensure that probability of any miscalculations are minimized. Your vat agent can also take overall vat calculations so that all of your vat returns and vat refunds are handled within the stipulated time period and that too without any calculation mistakes. The hmrc vat department also offers various vat accounting schemes including the flat rate scheme, and in such a case different calculation methods will have to be employed.

Although vat is not a very complex tax method, you will still require calculations that manage to separate your basic costs from taxes. This will allow you to purchase and sell your services and goods after calculating proper profits. As you will also need to file regular vat returns and might also need to make an application for vat refunds, precise vat calculations will allow you to stay on the appropriate side of the vat law.