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 which have embraced vat use various vat rates on different services and goods, and you also have to calculate each vat rate precisely so as to file proper vat returns as well as give the proper 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 products or services which you purchase or sell is bound to fall under one of these classifications. Most of these goods and services fall under the regular vat rate of 17.5% that is slated to rise to 20% from January 4, 2011 onwards. Other services and goods fall under the reduced vat rate of 5% while a select few fall under the zero vat rate vatregistrationnumber. Additionally, there are certain services and goods such as those associated with charitable events, amongst others that come under the vat exempt scheme where no vat is usually added or claimed back.
Your vat calculations will begin once you know the correct vat rate of each one of the products and services. For example, if you are selling a set of shoes to the customers for ?200 without vat then at 17.5% vat, your vat amount will be ?35 while the total amount of your vat invoice including vat will 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 inclusive of vat will be ?52.50. It is crucial to understand your basic product or service cost, your vat cost as well as your total cost inclusive of vat so that you can bill your customers at the best possible rates whilst filing your vat returns without making any calculation errors.
Calculating the right amount of vat can also be vital when you apply for vat refunds important site. You would need to do this if 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 should apply for vat reclaim for getting your money back already paid in the nation of origin. You need to hire a specialist vat agent so that probability of any miscalculations are minimized. Your vat agent could also take overall vat calculations so that all of your vat returns and vat refunds are handled in the stipulated time period and that too without calculation mistakes. The hmrc vat department 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 isn’t a very complex tax method, you will still require calculations that are able to separate your basic costs from taxes. This will likely allow you to purchase and sell your goods and services after calculating proper profit margins. Since you also have to file regular vat returns and may also have to apply for vat refunds, precise vat calculations will help you remain on the right side of the vat law.