If you’re a vat registered trader in the UK then you can steer clear of 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 allows you to first pay vat and then cancel it out so that 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 may have already paid vat in those countries. Alternatively, you might also have obtained such services in the UK itself from the supplier situated in a eu country. Every one of these factors would vat validation turn out boosting your expenses since 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 along 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 good customs and excise customs vat agent with a wide reach practically in most eu countries that practise vat. This kind of agent would surely understand all uk vat and eu vat regulations and could enable you to claim reverse charge vat that might have been paid to a foreign company situated in another country including a vat-friendly eu country.
You can reclaim vat already covered specified services while filing your vat returns itself. If you’re in Britain then you’ll have to calculate and indicate the amount of paid in Box 1 of the vat return form. You’ll then have to specify the same amount in Box 4 of the return to ensure the amount stands cancelled. You’ll have to specify the full amount of the provision in Box 6 and 7 in the vat return form in order to complete your reverse charge vat claim. However, you will need to convert the currency of any vat paid in a foreign country to sterling before you decide to fill in the amounts in those boxes.
This reverse charge process can also be called tax shift and you can go in 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 last 1 year while you can even apply before this vat threshold amount may be achieved. Once you start charging vat to the customers and file regular vat returns then any services rendered by you an overseas company could be reclaimed back in future vat returns, provided you follow all necessary guidelines issued by hmrc vat department.
Although following vat rules are not very difficult, it is usually preferable to opt for the services of proficient vat agent that may handle all of your vat requirements seamlessly. This will enable 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 taken care of services rendered by way of a foreign company within and out the UK.