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

If you have a running business in the UK or intend to start one then you ought to know everything about the increase in hmrc vat rates in the coming year. This will help you to quickly incorporate all the necessary changes in your vat invoices and vat returns, and help you to carry on running your business without any interruptions.

Much like most other Countries in Europe, the UK too has embraced vat or value added tax to be a system for avoiding double taxation on goods and reducing tax leaks. In case your current taxable sales exceed £70,000 pounds during the past 12 months then you can apply for vat registration and turn into a vat registered dealer. This move will allow you to receive a vat number which will have to be mentioned in each vat invoice that you issue to the customers. This vat invoice will also have to say the vat rate charged as well as 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 hmrc. The regular vat rates are 17.5% that is slated to increase to 20% from January 4, 2011. You’ll thus need to issue tax invoices with the new standard rates from January 4, 2011 onwards and also file your vat return based on the new vat rates. The lower 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 remain exactly the same. To be secure and safe, you should however, ask your vat agent or consultant to stay glued to any or all changes in uk vat as well as eu vat rules, particularly if you import services or goods from member EU countries that follow vat.

Come January 4, 2011 and the vat threshold limit, and the flat rate vat scheme limit too might be changed to incorporate the change in standard vat rates. However, in case you have already paid vat on products or services in another country before these were imported to the UK then you’ll still be able to ask for vat reclaim by completing the requisite vat form. In the case of any doubts you can always go to the hmrc vat website while also utilizing various vat online services offered by the department. Several other eu countries too have either raised or intend to raise vat rates in the future as numerous countries had offered special rates to tide over the economic recession.

It is thus essential that you clearly comprehend the implications of increased vat rates on your own business before, during and after the change in vat rates. This will help you to file your vat returns correctly while also charging revised vat rates to your customers. You may anyway also disclose any errors that may have already 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 rise in costs. However, this variation will also have to be reflected in coming vat returns and calculations. You need to make an effort to be aware of everything about the increase in hmrc vat rates within the coming year so your business has a seamless transition into the New Year.