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Precise vat calculations are a must for perfect vat accounting

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If you’re a VAT registered trader in the United Kingdom or other vat-enabled eu country then precise vat calculations are a must for perfect vat accounting. All countries that have embraced vat use various vat rates on different services and goods, and you also need to calculate each vat rate precisely in order to file proper vat returns as well as give the correct amount of vat tax.

In the UK, all vat rules are from HM Revenue and Customs or hmrc vat department. Hmrc has classified all taxable and vat exempt services and goods into 14,000 classifications. Thus, any products or services that you purchase or sell is bound to come under one of these classifications. Most of these services and goods come under the regular vat rate of 17.5% which is slated to increase to 20% from January 4, 2011 onwards. Other goods and services come under the lower vat rate of 5% while a limited number fall under the zero vat rate. There are also certain services and goods like those related to charitable events, amongst others that come under the vat exempt scheme where no vat is usually added or claimed back vat validation.

Your vat calculations will begin when you know the correct vat rate of each of your products and services. For instance, if you are selling a pair of shoes to the customers for ?200 without vat then at 17.5% vat, your vat amount will be ?35 whilst the total amount of your vat invoice including vat is going to be ?235. Similarly, if you sell an item for ?50 that attracts 5% vat rate then your vat amount on that product will be ?2.50 while the total amount inclusive of vat will be ?52.50. It is very important to know your basic products or services cost, your vat cost and your total cost including vat so that you can bill your clients in the most effective rates while also filing your vat returns without making any calculation errors.

Calculating the right amount of vat can also be vital when you make application for vat refunds. You’ll have to do that if your goods or services are imported to the UK from any other eu country which has already collected vat in it. In such a case, you would need to apply for vat reclaim for getting your money back already paid in the nation of origin. You should hire a specialist vat agent so that probability of any miscalculations are minimized. Your vat agent can also take over all vat calculations in order that all of your vat returns and vat refunds are handled within the stipulated time period and that too without any calculation mistakes. The hmrc vat department offers various vat accounting schemes such as the flat rate scheme, and in such a case different calculation methods will have to be employed your domain name.

Although vat is not a very complex tax method, you still require calculations that manage to separate your basic costs from taxes. This will allow you to trade your goods and services after calculating proper profits. Since you also have to file regular vat returns and may also need to apply for vat refunds, precise vat calculations will allow you to stay on the right side of the vat law.


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