If you are a vat registered trader in Britain you’ll be able to 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 then cancel it so that your net cost does not increase.
If you are a trader that utilizes services of foreign companies, particularly those located in vat-friendly eu countries then you might have already paid vat in those countries. On the other hand, you may also have obtained such services in Britain itself from a supplier situated in a eu country. All these factors would end up 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 in most eu countries that practise vat. Such an agent vat validation would surely understand all uk vat and eu vat regulations and could enable you to claim reverse charge vat that may have been paid to a foreign company situated 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’ll have to calculate and indicate the amount of paid in Box 1 of your vat return form. You will then need to specify exactly the same amount in Box 4 of that return so that the amount stands cancelled. You will also have to specify the full amount 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 the vat paid in a 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 in for such a vat reclaim only when you are a vat registered trader in Britain. In order to become a vat registered trader, your taxable sales need to cross over ?70,000 in the previous 12 months although you can even apply before vat threshold amount has been achieved. As soon as 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 usually are not really hard, it is always preferable to opt for the services of an proficient vat agent that may handle all your vat requirements seamlessly. This will likely allow you to focus on increasing your business while your vat agent files for reverse charge vat and recovers your taxes that have already been paid for services rendered by a foreign company within or outside the UK.