Accurate vat calculation can help you calculate exact vat rates

Once you start issuing vat invoices to the clients then accurate vat calculation can help you calculate exact vat rates. Calculating vat rates is very easy and you will have to display all your calculations within your vat invoices as well as your vat returns too.

If 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 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 vat rates next to your goods or services which 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 just in case you have trouble in slotting your products or services within the right classification then you certainly should appoint an expert 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 regular rate of 17.5% which 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 and other services and also a zero vat rate on specific goods and services. Thus, if a certain product is taxed at 17.5% in that case your calculations will have to be according to that vat rate only.

As an example, if you sell a product at ?100 to a client that draws vat at 17.5% in that case your vat calculations will have 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 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. It is possible to put in a vat accounting software package on your desktop so as 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 may also differ on the vat scheme which you opt for because the flat rate scheme will require 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 extremely important while selling or buying goods that are subject to vat tax. These amounts will have to be reflected within your purchases, sales, vat returns, and vat refunds too. Your business will run smoothly while hmrc will also remain happy with you only when your vat calculation is accurate and clear in your vat documents and books.