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 allows you to first pay vat and after that cancel it so that your net cost does not increase.
If you are a trader which uses services of foreign companies, particularly those located in vat-friendly eu countries then you may have already paid vat in those countries. On the other hand, you may also have obtained such services in the UK itself www.vatcheck.com/vat from a supplier located in a eu country. All these factors would end up boosting your expenses as you could end up paying vat on certain services including those linked 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 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 practically 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 situated 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 the UK then you will need to calculate and indicate the amount of paid in Box 1 of the vat return form. You will then need to specify the same amount in Box 4 of the return so that the amount stands cancelled. You will also need to specify the total amount of the supply in Box 6 and 7 in 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 in the amounts in those boxes.
This reverse charge process can also be known as tax shift and you can go for such a vat reclaim only when 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 1 year while you may even apply before 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 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 usually are not very difficult, it is usually better to choose services of an proficient vat agent that may handle all of your vat requirements seamlessly. This will likely allow you to concentrate on boosting your business while your vat agent files for reverse charge vat and recovers your taxes that have previously been taken care of services rendered by a foreign company within or outside the UK.