If you are 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 has already been paid. This vat procedure allows you to first pay vat and then cancel it so your net cost doesn’t increase.
If you’re a trader that utilizes services of foreign companies, especially those located in vat-friendly eu countries then you certainly may have already paid vat in those countries. Alternatively, you might also have obtained such services in the UK itself from the supplier located in a eu country. Every one of these factors would end up boosting your expenses as you might 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 along 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 having 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 paid for specified services while filing your vat returns itself. If you’re in the UK then you will need to calculate and indicate the amount of paid in Box 1 www.vatnumbersearch.com of your vat return form. You’ll then need to specify exactly 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 of the vat return form in order to complete your reverse charge vat claim. However, you will need to convert the currency of any vat paid in the foreign country to sterling before you decide to fill in the amounts in those boxes.
This reverse charge process can also be called tax shift and you can go for such a vat reclaim only if 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 although you can even apply before 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 a foreign 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 always preferable to choose services of an proficient vat agent that may handle all your vat requirements seamlessly. This will enable 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 or outside the UK.