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 when 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 so that your net cost does not increase.
If you are a trader which uses services of foreign companies, especially those situated in vat-friendly eu countries then you certainly may have already paid vat in those countries. On the other hand, you might also have received such services in Britain itself from the supplier located in a eu country. All these factors would turn out boosting 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 vatnumbersearch regulations.
If you have a lttle bit difficulty in interpreting these vat rules then you should enrol the services of a competent 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 already been paid to a foreign company situated 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 the UK then you’ll need to calculate and indicate the amount of paid in Box 1 of the vat return form. You’ll then need to specify exactly the same amount in Box 4 of that return to ensure the amount stands cancelled. You’ll have to specify the full quantity 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 called tax shift and you may go in for such a vat reclaim only if you are a vat registered trader in the UK. In order to be a vat registered trader, your taxable sales have to go over ?70,000 in the last 1 year although you can even apply before this vat threshold amount has been achieved. Once you start charging vat to your customers and file regular vat returns then any services rendered by you an overseas company can 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 usually preferable to opt for the services of an proficient vat agent that can handle all your vat requirements seamlessly. This will 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 taken care of services rendered by a foreign company within and out the UK.