Once you start issuing vat invoices to the clients then accurate vat calculation will help you calculate exact vat rates. Calculating vat rates is very simple and you will need to display all of your calculations within your vat invoices as well as your vat returns too.
If you are located in the UK you would then have turned into a VAT registered trader as soon as your taxable sales would have reached the vat threshold figure of 70,000 pounds in the past 12 months vatnumbersearch.com. This would 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 alongside your goods or services that you have sold to your clients. In order to calculate vat you need to 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 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 an expert vat agent with complete knowledge on uk vat rules as well as eu vat rules in the event you import goods from any eu country. In the UK vat is spread into three slabs, namely the regular rate of 17.5% that will soon increase to 20% from January 4, 2011. There’s another reduced rate of 5% which is also applicable on certain children?s goods as well as other services and also a zero vat rate on specific services and goods helpful hints. 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.
For example, let’s say you sell an item at ?100 to your 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 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 can be claimed back via a vat reclaim form which also needs to calculate the vat amount paid. It is possible to install a vat accounting software package on your computer 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 also need calculations of various vat amounts paid and calculated. These calculations will also differ on the vat scheme that you choose because the flat rate scheme will require different calculations as compared to the other schemes. You will also need to learn 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 items that are subject to vat tax. These amounts will have to be reflected within your purchases, sales, vat returns, and vat refunds too. Your enterprise will operate correctly while hmrc may also remain pleased with you once your vat calculation is accurate and clear in your vat documents and books.