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 was already paid. This vat procedure will allow you to first pay vat and after that cancel it out so your net cost doesn’t increase.
If you are a trader which uses services of foreign companies, particularly those located in vat-friendly eu countries then you certainly may have already paid vat in those countries. Alternatively, you might also have received such services in Britain itself from a supplier situated in a eu country. Every one of these factors would end up increasing your expenses as you could 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 along with the European Community simplification regulations.
In case you have a bit difficulty in interpreting these vat rules you then should enrol the services 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 may help you to claim reverse charge vat that may 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 covered specified services while filing your vat returns itself. If you are in Britain then you’ll need to calculate and indicate the amount of paid in Box 1 vatnumbersearch of your vat return form. You’ll then need to specify the same amount in Box 4 of the return so that the amount stands cancelled. You will also have to specify the full amount of the supply in Box 6 and 7 of the vat return form so as 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 decide to fill out the amounts in those boxes.
This reverse charge process can also be known as tax shift and you may go in for this type of vat reclaim only if you are 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 although you may even apply before vat threshold amount may be achieved. Once you start charging vat to your customers and file regular vat returns then any services rendered by you from 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 always better to opt for the services of proficient vat agent that can handle all of your vat requirements seamlessly. This will likely allow you to concentrate on increasing your business while your vat agent files for reverse charge vat and recovers your taxes which may have already been paid for services rendered by way of a foreign company within and out the UK.