If you’re 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 was already paid. This vat procedure allows you to first pay vat and after that cancel it so your net cost does not 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 might also have received such services in Britain itself from a supplier located in a eu country. Every one of these factors would turn out boosting your expenses since you might 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 regulations.
If you have a little difficulty in interpreting these vat rules you then should enrol the expertise of a competent customs and excise customs vat agent having a wide reach practically in most eu countries that practise vat. This kind of agent vatvalidation 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 covered specified services while filing your vat returns itself. If you’re in the UK then you’ll need to calculate and indicate how much paid in Box 1 of your 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’ll have to specify the full amount of the supply in Box 6 and 7 in the vat return form so as to complete your reverse charge vat claim. However, you will need 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 known as tax shift and you can go for such a vat reclaim only if you are a vat registered trader in the UK. In order to be a vat registered trader, your taxable sales have to cross over ?70,000 in the last 1 year while you may even apply before vat threshold amount may be 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 from hmrc vat department.
Although following vat rules usually are not very difficult, it is usually preferable to opt for the services of a proficient vat agent that can 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 that have already been paid for services rendered by way of a foreign company within or outside the UK.