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 has already been paid. This vat procedure allows you to first pay vat and after that cancel it out so your net cost does not increase.
If you are a trader that utilizes services of foreign companies, particularly 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 the supplier located in a eu country. All these factors would vat validation end up boosting your expenses as 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.
In case you have a bit difficulty in interpreting these vat rules you then should enrol the services of a competent customs and excise customs vat agent having 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 may have been paid to a foreign company situated 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 are in Britain then you will have to calculate and indicate the amount of paid in Box 1 of your vat return form. You’ll 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 total quantity 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 have to convert the currency of any vat paid in a 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 such a vat reclaim only if you’re a vat registered trader in Britain. In order to be a vat registered trader, your taxable sales need to go over ?70,000 in the previous 12 months although you can even apply before this vat threshold amount may be achieved. Once 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 are not really hard, it is usually preferable to choose services of a proficient vat agent that can handle all of 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 previously been paid for services rendered by a foreign company within and out the UK.