Precise vat calculations undoubtedly are a must for perfect vat accounting

If you’re a VAT registered trader in the UK 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 also need to calculate each vat rate precisely in order to file proper vat returns and also give the correct 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 sell or buy is bound to come under one such classifications. Most of these goods and services come under the standard vat rate of 17.5% that is slated to rise to 20% from January 4, 2011 onwards. Other services and goods come under the reduced vat rate of 5% while a select few come under the zero vat rate. Additionally, there are certain goods and services like 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 start once you know the correct vat rate of every of the products and services. For example, if you sell a set of shoes to your customers for ?200 without vat then at 17.5% vat, your vat amount is going to be ?35 while the total amount of your vat invoice including vat is going to be ?235. Similarly, if you sell a product for ?50 that attracts 5% vat rate then your vat amount on that product will be ?2.50 while the total amount inclusive of vat will be ?52.50. It is very important to know your basic product or service cost, your vat cost and your total cost including vat so that you can bill your clients in the best possible rates while also filing your vat returns without creating any calculation errors.

Calculating the right amount of vat can also be vital whenever you make application for vat refunds. You’ll have to do that in case your goods or services are imported to the UK from the other eu country that has already collected vat in it. In such a case, you would need to make application for vat reclaim to get back the money already paid in the country 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 in order that all your vat returns and vat refunds are handled in the stipulated time frame and that too without 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 need to be employed.

Although vat is not a very complex tax method, you still require calculations that manage to separate your basic costs from taxes. This will allow you to trade 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 remain on the appropriate side of the vat law.