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 was already paid. This vat procedure allows you to first pay vat and then cancel it out so that your net cost doesn’t increase.
If you are a trader which uses services of foreign companies, particularly those situated 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 Britain itself from a supplier located in a eu country. All these factors would turn out boosting your expenses as you might 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.
In case you have a little difficulty in interpreting these vat rules then you should enrol the services of a good 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 may have 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’re 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 have to specify the same amount in Box 4 of the return to ensure the amount stands cancelled. You’ll have to specify the full quantity of the supply 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 any vat paid in a foreign country to sterling before you fill out the amounts in those boxes.
This reverse charge process can also be known as tax shift and you may go in for such a vat reclaim only when you are a vat registered trader in Britain. In order to become a vat registered trader, your taxable sales need to cross over ?70,000 in the last 12 months although you may even apply before this vat threshold amount has been achieved. As soon as you start charging vat to your customers and file regular vat returns then any services rendered by you from a foreign 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 better to choose services of proficient vat agent that may handle all of your vat requirements seamlessly. This will enable you to concentrate on boosting your business while your vat agent files for reverse charge vat and recovers your taxes which may have already been taken care of services rendered by a foreign company within or outside the UK.