If you are a vat registered trader in Britain 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 vat verification.
If you are a trader which uses 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 obtained such services in the UK itself from a supplier located in a eu country. All these factors would end up 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.
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 in most eu countries that practise vat. Such an agent would surely understand all uk vat and eu vat regulations and may enable you to claim reverse charge vat that might have already been paid to a foreign company located in another country together with a vat-friendly eu country.
You are able to reclaim vat already covered specified services while filing your vat returns itself. If you’re in Britain then you’ll have to calculate and indicate how much VAT paid in Box 1 of your vat return form. You will then have to specify the same amount in Box 4 of the return so that the amount stands cancelled. You’ll need to specify the total amount of the provision 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 the foreign country to sterling before you fill out the amounts in those boxes.
This reverse charge process is also called tax shift and you can go in for this type of vat reclaim only if you are 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 may even apply before this vat threshold amount may be achieved. As soon as you start charging vat to the 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 issued by hmrc vat department click this link.
Although following vat rules usually are not very difficult, it is always preferable to choose services of a proficient vat agent that can handle all of your vat requirements seamlessly. This will likely enable you to concentrate on boosting 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.