If you are a vat registered trader in Britain then you can steer clear of the problem of double taxation on services utilized from foreign companies when you claim reverse charge vat on services where vat was already paid. This vat procedure allows you to first pay vat and after that cancel it so your net cost doesn’t increase.
If you are a trader that utilizes services of foreign companies, particularly those situated in vat-friendly eu countries then you certainly may have already paid vat in those countries. On the other hand, you may also have obtained such services in the UK itself vat check from a supplier located in a eu country. All these factors would end up increasing your expenses as you might end up paying vat on certain services including those related to land, property, intra EC-freight services, and other such services as defined by the HM Revenue and Customs or hmrc department in conjunction with the European Community simplification regulations.
If you have a bit difficulty in interpreting these vat rules you then should enrol the expertise of a competent customs and excise customs vat agent having a wide reach practically in most eu countries that practise vat. Such an agent would surely understand all uk vat and eu vat regulations and may enable you to claim reverse charge vat that may have already been paid to a foreign company located in another country including a vat-friendly eu country.
You can reclaim vat already paid for specified services while filing your vat returns itself. If you’re in the UK then you’ll have to calculate and indicate the amount of paid in Box 1 of the vat return form. You will then need to specify the same amount in Box 4 of the return so that the amount stands cancelled. You’ll need to specify the total quantity of the supply in Box 6 and 7 in the vat return form in order to complete your reverse charge vat claim. However, you will have to convert the currency of any vat paid in the foreign country to sterling before you fill out the amounts in those boxes.
This reverse charge process can also be known as tax shift and you can go for such a vat reclaim only when you’re a vat registered trader in the UK. In order to be a vat registered trader, your taxable sales have to cross over ?70,000 in the last 1 year while you may even apply before vat threshold amount has been achieved. Once you start charging vat to the customers and file regular vat returns then any services rendered by you from a foreign company could be reclaimed back in future vat returns, provided you follow all necessary guidelines from hmrc vat department.
Although following vat rules are not really hard, it is usually preferable to opt for the services of an proficient vat agent that can handle all of your vat requirements seamlessly. This will likely allow you to concentrate on boosting your business while your vat agent files for reverse charge vat and recovers your taxes which may have previously been paid for services rendered by way of a foreign company within or outside the UK.