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 when you claim reverse charge vat on services where vat has already been paid. This vat procedure will allow you to first pay vat and then cancel it so your net cost doesn’t increase.
If you’re a trader that utilizes services of foreign companies, particularly those located in vat-friendly eu countries then you certainly may have already paid vat in those countries. On the other hand, you might also have obtained such services in the UK itself vatcheck.com/vat from the supplier located in a eu country. Every one of these factors would end up increasing your expenses since you might end up paying vat on certain services including those linked 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 little difficulty in interpreting these vat rules then you should enrol the expertise of a good customs and excise customs vat agent having 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 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 can 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 the amount of paid in Box 1 of the 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 need to specify the total amount of the provision in Box 6 and 7 of the vat return form so as to complete your reverse charge vat claim. However, you will have to convert the currency of the 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 in for such a vat reclaim only when you’re a vat registered trader in the UK. In order to become a vat registered trader, your taxable sales need to go over ?70,000 in the previous 1 year while you may even apply before this vat threshold amount may be achieved. As soon as you start charging vat to the customers and file regular vat returns then any services rendered by you a foreign company can 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 always better to opt for the services of an proficient vat agent that can handle all your vat requirements seamlessly. This will allow you to concentrate on increasing your business while your vat agent files for reverse charge vat and recovers your taxes which may have already been paid for services rendered by a foreign company within or outside the UK.