If you’re a vat registered trader in the UK then you can avoid 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 that your net cost does not increase.
If you are a trader that utilizes services of foreign companies, particularly those situated in vat-friendly eu countries then you might have already paid vat in those countries. Alternatively, you might also have received such services in the UK itself from a supplier situated in a eu country. Every one of these factors would turn out boosting your expenses since you could 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.
In case you have a bit difficulty in interpreting these vat rules then you should enrol the services of a competent customs and excise customs vat agent with a wide reach practically in most eu countries that practise vat. This kind of agent vat validation would surely understand all uk vat and eu vat regulations and may help you to claim reverse charge vat that may have already been paid to a foreign company located in another country together with a vat-friendly eu country.
You can reclaim vat already paid for specified services while filing your vat returns itself. If you are in Britain then you’ll need to calculate and indicate how much paid in Box 1 of your vat return form. You’ll then have to specify exactly the same amount in Box 4 of the 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 have to convert the currency of any vat paid in a foreign country to sterling before you decide to fill out the amounts in those boxes.
This reverse charge process can also be known as tax shift and you may go for such a vat reclaim only if you’re 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 12 months while you can even apply before this vat threshold amount may be achieved. Once you start charging vat to the 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 usually preferable to opt for the services of an proficient vat agent that may handle all your vat requirements seamlessly. This will allow you to focus on increasing your business while your vat agent files for reverse charge vat and recovers your taxes which may have already been taken care of services rendered by a foreign company within and out the UK.