Once you start issuing vat invoices to your clients then accurate vat calculation will help you calculate exact vat rates. Calculating vat rates is very easy and you will need to display all of 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 would have reached the vat threshold figure of 70,000 pounds within the past Year vat number search. This could result in issuance of vat invoices by you to all of your future clients. Your vat invoice would need to mention your vat number along with vat rates alongside your services or goods that you have sold to the 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 UK.
There are 14,000 vat classifications provided by hmrc just in case you’ve trouble in slotting your goods and services in the right classification then you 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 lower rate of 5% which is also applicable on certain children?s goods and other services along with a zero vat rate on specific services and goods go here. Thus, in case a certain product is taxed at 17.5% then your calculations will need to be according to that vat rate only.
As an example, let’s say you sell an item at ?100 to a client that attracts vat at 17.5% then your vat calculations will have to display the vat rate, i.e. ?17.50 following the product rate and also 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 in your vat returns. Similarly any vat already paid on goods or services imported by you to the UK might be claimed back via a vat reclaim form that also has to calculate the vat amount paid. You can easily install a vat accounting software package on your desktop in order to accurately calculate vat on each vat invoice since mistakes will not be looked at kindly by the hmrc vat department.
Your vat returns will likely need calculations of varied vat amounts paid and calculated. These calculations may also differ on the vat scheme which you choose since the flat rate scheme will call for different calculations as compared to the other schemes. You will also need to learn on the way to calculate vat amounts from vat exclusive and vat inclusive prices so as to get the exact amount of vat.
Accurate calculation of vat is very important while selling or buying items that are subject to vat tax. These amounts will need to be reflected within your purchases, sales, vat returns, and vat refunds too. Your business will operate correctly while hmrc will also remain happy with you once your vat calculation is accurate and clear in all your vat documents and books.