If you are a vat registered trader in Britain 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 then 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 might have already paid vat in those countries. On the other hand, you may also have received such services in the UK itself from a supplier located in a eu country. Every one of these factors would vat validation end up increasing your expenses since you might 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 in conjunction with the European Community simplification regulations.
If you have a bit difficulty in interpreting these vat rules then you 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. Such an agent would surely understand all uk vat and eu vat regulations and may help you to claim reverse charge vat that might have already been paid to a foreign company situated in another country including a vat-friendly eu country.
You can reclaim vat already paid for 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 your 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 total 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 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 known as tax shift and you may go in for such a vat reclaim only if you are a vat registered trader in Britain. In order to be a vat registered trader, your taxable sales have to go over ?70,000 in the last 1 year while you may even apply before this vat threshold amount may be achieved. As soon as 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 from hmrc vat department.
Although following vat rules are not really hard, it is usually preferable to choose services of an proficient vat agent that can handle all your vat requirements seamlessly. This will likely 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 paid for services rendered by way of a foreign company within or outside the UK.