Accurate vat calculation can help you calculate exact vat rates

When 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 within your vat invoices as well as your vat returns too.

In case you are located 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 12 months. This could lead to issuance of vat invoices by you to all your future clients. Your vat invoice will have to mention your vat number together with vat rates next to your services or goods that you have sold to your clients. To be able to calculate vat you should know the classification of your products or services as decided by HM Revenue and Customs or hmrc vat department that manages every aspect of vat in the United Kingdom.

There are 14,000 vat classifications provided by hmrc and if 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 if you import goods from any eu country. In the United Kingdom vat is spread into three slabs, namely the standard rate of 17.5% that will soon increase to 20% from January 4, 2011. There’s another lower rate of 5% that is also applicable on certain children?s goods as well as other services and also a zero vat rate on specific services and goods. Thus, in case a certain product is taxed at 17.5% in that case your calculations will need to be according to that vat rate only.

As an example, let’s say you sell a product at ?100 to a client that attracts vat at 17.5% in that case your vat calculations will need to display the vat rate, i.e. ?17.50 after the product rate and also the total amount of the sale including vat, i.e. ?117.50, the final value of your vat invoice. These amounts must also be calculated and summed up within your vat returns. Similarly any vat already paid on services or goods imported by you into the UK can be claimed back via a vat reclaim form which also has to calculate the vat amount paid. You can easily install a vat accounting software program 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 various vat amounts paid and calculated. These calculations may also differ on the vat scheme that you opt for 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 to get the precise amount of vat.

Accurate calculation of vat is very important while selling or buying items that are governed by vat tax. These amounts will need to be reflected within your purchases, sales, vat returns, and vat refunds too. Your business will run smoothly while hmrc may also remain pleased with you once your vat calculation is accurate and clear in all your vat documents and books.