If you’re a vat registered trader in the UK you’ll be able to steer clear of the problem of double taxation on services utilized from foreign companies when you claim reverse charge vat on services where vat was already paid. This vat procedure allows you to first pay vat and then cancel it out so your net cost does not increase.
If you’re a trader which uses services of foreign companies, especially those situated in vat-friendly eu countries then you might have already paid vat in those countries. Alternatively, you might also have obtained such services in Britain itself from a supplier located 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 linked 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 vatnumbersearch regulations.
If you have a little difficulty in interpreting these vat rules then you 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. Such an agent would surely understand all uk vat and eu vat regulations and could help 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 can reclaim vat already covered specified services while filing your vat returns itself. If you’re in Britain then you will need to calculate and indicate the amount of paid in Box 1 of your vat return form. You’ll then have to specify the same amount in Box 4 of the return so that the amount stands cancelled. You will also need to specify the full amount of the provision in Box 6 and 7 in the vat return form so as to complete your reverse charge vat claim. However, you will need to convert the currency of the vat paid in a foreign country to sterling before you decide to fill in the amounts in those boxes.
This reverse charge process is also called 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 need to cross over ?70,000 in the last 12 months although you can even apply before this 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 from hmrc vat department.
Although following vat rules usually are not really hard, it is usually better to opt for the services of proficient vat agent that can handle all 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 previously been paid for services rendered by way of a foreign company within and out the UK.