If you’re 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 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 that your net cost doesn’t 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 a supplier located in a eu country. Every one of these factors would turn out increasing your expenses since you might end up paying vat on certain services including those related 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 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 enable you to claim reverse charge vat that might have been paid to a foreign company located in another country including 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 will have to calculate and indicate the amount of paid in Box 1 www.vatnumbersearch.com of the vat return form. You will then have to specify the same amount in Box 4 of that return so that the amount stands cancelled. You’ll need 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 a foreign country to sterling before you fill in 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’re 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 previous 12 months while you can even apply before 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 could be reclaimed back in future vat returns, provided you follow all necessary guidelines from hmrc vat department.
Although following vat rules usually are not very difficult, it is usually better to opt for the services of a proficient vat agent that may handle all your vat requirements seamlessly. This will enable you to focus on boosting 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.