When you start issuing vat invoices to your clients then accurate vat calculation can help you calculate exact vat rates. Calculating vat rates is quite simple and you will have to display all your calculations in your vat invoices and your vat returns too.
In case you are based in the UK you would then have converted into a VAT registered trader as soon as your taxable sales might have reached the vat threshold figure of 70,000 pounds within the past Year. This could result in issuance of vat invoices by you to all your future clients. Your vat invoice will have to mention your vat number together with vatvalidation.com vat rates next to your services or goods which you have sold to your clients. To be able to calculate vat you should know the classification of the goods and services as decided by HM Revenue and Customs or hmrc vat department that manages all aspects of vat in the United Kingdom.
There are actually 14,000 vat classifications given by hmrc just in case you’ve trouble in slotting your goods and services within the right classification you then should appoint a professional vat agent with complete knowledge on uk vat rules and even eu vat rules in the event you import goods from any eu country. In the UK vat is spread into three slabs, namely the standard rate of 17.5% that will soon increase to 20% from January 4, 2011. There is another reduced rate of 5% which is also applicable on certain children?s goods as well as other services along with a zero vat rate on specific goods and services. Thus, if a certain product is taxed at 17.5% then your calculations will have to be according to that vat rate only.
For example, let’s say you sell an item at ?100 to your client that draws vat at 17.5% in that case your vat calculations will need to display the vat rate, i.e. ?17.50 following the product rate as well as the total quantity of the sale including vat, i.e. ?117.50, the final value of your vat invoice. These amounts will also need to be calculated and summed up within your vat returns. Similarly any vat already paid on services or goods imported by you to the UK can be claimed back via a vat reclaim form that also has to calculate the vat amount paid. It is possible to install a vat accounting software program on your desktop in order to accurately calculate vat on each vat invoice since mistakes will not be viewed kindly by the hmrc vat department.
Your vat returns will likely need calculations of varied vat amounts paid and calculated. These calculations will also differ on the vat scheme that you choose because the flat rate scheme will call for different calculations when compared to the other schemes. You will also need to read on how to calculate vat amounts from vat exclusive and vat inclusive prices to get the exact amount of vat.
Accurate calculation of vat is very important while selling or buying goods that are governed by vat tax. These amounts will have to be reflected within your purchases, sales, vat returns, and vat refunds too. Your enterprise will run smoothly while hmrc may also remain happy with you when your vat calculation is accurate and clear in your vat documents and books.