Know all about the increase in hmrc vat rates from the coming year

If you have a running business in the UK or plan to start one you then should know all about the rise in hmrc vat rates in the coming year. This should help you to quickly incorporate all of the necessary changes in your vat invoices and vat returns, and enable you to carry on running your enterprise without any interruptions.

Just like most other European countries, the United Kingdom too has embraced vat or value added tax as a system for avoiding double taxation on goods and reducing tax leaks. If your current taxable sales exceed £70,000 pounds in the past 12 months you’ll be able to apply for vat registration and turn a vat registered dealer. This move will enable you to obtain a vat number which will have to be mentioned in each vat invoice which you issue to the customers. This vat invoice will also have to say the vat rate charged and your vat returns too will have to mention all applicable vat rates and amounts in detail.

Currently, the United Kingdom has 3 vat rates as decided by the hm revenue and customs department or the hmrc. The standard vat rates are 17.5% that is slated to increase to 20% from January 4, 2011. You will thus have to issue tax invoices with the new standard rates from January 4, 2011 onwards as well as file your vat return based on the new vat rates. The reduced vat rate of 5% is slated to stay the same as well as the zero vat rate. Vat exempt rates and classifications too are slated to stay the same. To be on the safe side, you should however, ask your vat agent or consultant to stay glued to all changes in uk vat in addition to eu vat rules, especially if you import goods or services from member EU countries that follow vat.

Come January 4, 2011 and the vat threshold limit, and also the flat rate vat scheme limit too might be changed to incorporate the modification in standard vat rates. However, in case you have already paid vat on goods and services in another country before these were imported to the UK then you will still be able to request vat reclaim by completing the requisite vat form. In the case of any doubts you could visit the hmrc vat website whilst utilizing various vat online services offered by the department. Several other eu countries too have either raised or plan to raise vat rates in the future as numerous countries had offered special rates to tide over the economic slowdown.

It’s thus essential that you clearly understand the implications of increased vat rates on your own business before, during and after the alternation in vat rates. This will help you to file for your vat returns correctly while also charging revised vat rates to your customers. You can anyway also disclose any errors that might have been committed during the transition period to the hmrc department and even make necessary adjustments in your next vat return as specified by them.

The increase in standard vat rates from 17.5% to 20% from January 4, 2011 will result in a marginal increase in costs. However, this change will also have to be reflected in coming vat returns and calculations. You should make an effort to know everything about the increase in hmrc vat rates in the coming year so your business has a seamless transition to the New Year.