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 which have embraced vat use various vat rates on different services and goods, and you need to calculate each vat rate precisely so as to file proper vat returns and also pay 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 goods and services into 14,000 classifications. Thus, any product or service that you sell or buy is likely to come under one such classifications. Many of these goods and services fall under the regular vat rate of 17.5% which 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 select few fall under the zero vat rate There are also certain services and goods such as those related to charitable events, among others that come 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 each of your products and services. For instance, if you are selling a pair of shoes to your customers for ?200 exclusive of 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, if you sell a product for ?50 that draws 5% vat rate then the vat amount on that product is going to be ?2.50 while the total amount inclusive of 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 inclusive of vat so that you can bill your clients in the best possible rates whilst filing your vat returns without making any calculation errors.

Calculating the correct amount of vat can also be vital when you make application for vat refunds click here. You would need to do this if your goods or services are imported to 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 back the money already paid in the country of origin. You need to hire an expert vat agent to ensure that probability of any miscalculations are minimized. Your vat agent can also take over all 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 also offers various vat accounting schemes such as the flat rate scheme, and in this type of case different calculation methods will need 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 likely allow you to trade your services and goods after calculating proper profits. Since you will also need to file regular vat returns and may also have to apply for vat refunds, precise vat calculations will help you stay on the right side of the vat law.