If you’re a vat registered trader in Britain then you can steer clear of the problem of double taxation on services utilized from foreign companies whenever 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 out so that your net cost does not increase.
If you’re a trader which uses services of foreign companies, especially those located in vat-friendly eu countries then you may have already paid vat in those countries. Alternatively, you may also have obtained such services in Britain itself from a supplier located in a eu country. Every one of 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, 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 competent customs and excise customs vat agent with 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 help you to claim reverse charge vat that might have already been paid to a foreign company situated 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 have to calculate and indicate how much paid in Box 1 of your vat return form. You will then have to specify the same amount in Box 4 of that return so that the amount stands cancelled. You’ll have to specify the total quantity of the supply in Box 6 and 7 of 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 out the amounts in those boxes.
This reverse charge process can also be 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 become a vat registered trader, your taxable sales need to cross over ?70,000 in the previous 12 months although you can even apply before vat threshold amount has been achieved. As soon as 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 issued by hmrc vat department.
Although following vat rules usually are not very difficult, it is usually better to choose services of an proficient vat agent that may handle all your vat requirements seamlessly. This will likely allow you to focus 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.