If you are 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 was already paid. This vat procedure will allow you to first pay vat and then cancel it so that your net cost doesn’t increase.
If you’re a trader which uses services of foreign companies, especially those situated in vat-friendly eu countries then you certainly 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, and 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 lttle bit difficulty in interpreting these vat rules then you should enrol the expertise of a competent customs and excise customs vat agent with a wide reach in most eu countries that practise vat. This kind of agent vat validation would surely understand all uk vat and eu vat regulations and could help 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 are in the UK then you will have to calculate and indicate how much paid in Box 1 of the vat return form. You’ll then need to specify exactly the same amount in Box 4 of the return so that the amount stands cancelled. You will also have 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 in the amounts in those boxes.
This reverse charge process is also called tax shift and you may go for this type of vat reclaim only if you’re a vat registered trader in the UK. In order to become a vat registered trader, your taxable sales need to cross over ?70,000 in the previous 12 months while you can even apply before this vat threshold amount has been achieved. Once you start charging vat to the customers and file regular vat returns then any services rendered by you from an overseas company can 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 better to opt for the services of an proficient vat agent that can handle all of your vat requirements seamlessly. This will likely allow you to concentrate on increasing your business while your vat agent files for reverse charge vat and recovers your taxes that have already been paid for services rendered by way of a foreign company within or outside the UK.