If you are a vat registered trader in Britain you’ll be able to avoid the problem of double taxation on services utilized from foreign companies whenever you claim reverse charge vat on services where vat has already been paid. This vat procedure will allow you to first pay vat and after that cancel it so your net cost doesn’t increase.
If you’re a trader which uses services of foreign companies, especially those located in vat-friendly eu countries then you might have already paid vat in those countries. Alternatively, you might also have obtained such services in Britain itself from the supplier situated in a eu country. Every one of these factors would turn out increasing your expenses as you could end up paying vat on certain services including those linked to land, property, intra EC-freight services, as well as 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 little difficulty in interpreting these vat rules then you should enrol the services of a good customs and excise customs vat agent with a wide reach in most eu countries that practise vat. This kind of agent would surely understand all uk vat and eu vat regulations and could help you to claim reverse charge vat that might have been paid to a foreign company located in another country together with a vat-friendly eu country.
You are able to reclaim vat already paid for specified services while filing your vat returns itself. If you are in the UK then you will have to calculate and indicate how much paid in Box 1 vatnumbersearch of the vat return form. You will then need to specify exactly the same amount in Box 4 of the return so that the amount stands cancelled. You’ll have to specify the full amount of the supply in Box 6 and 7 in the vat return form so as to complete your reverse charge vat claim. However, you will have to convert the currency of the 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 may go for this type of vat reclaim only when you’re a vat registered trader in the UK. In order to become a vat registered trader, your taxable sales have to cross over ?70,000 in the previous 12 months while you can even apply before vat threshold amount may be achieved. As soon as you start charging vat to your customers and file regular vat returns then any services rendered by you from a foreign company can be reclaimed back in future vat returns, provided you follow all necessary guidelines from hmrc vat department.
Although following vat rules are not very difficult, it is always better to choose services of a proficient vat agent that may handle all of your vat requirements seamlessly. This will allow you to concentrate on increasing your business while your vat agent files for reverse charge vat and recovers your taxes that have already been taken care of services rendered by way of a foreign company within and out the UK.