If you are a vat registered trader in the UK then you can 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 will allow you to first pay vat and then cancel it out so your net cost doesn’t increase.
If you’re a trader which uses services of foreign companies, particularly those located in vat-friendly eu countries then you certainly might have already paid vat in those countries. On the other hand, you may also have received such services in Britain itself vat check from the 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, and 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 then you should enrol the services of a competent customs and excise customs vat agent with 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 may enable you to claim reverse charge vat that might have already been paid to a foreign company located in another country including a vat-friendly eu country.
You can reclaim vat already covered 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 your vat return form. You will then need to specify the same amount in Box 4 of that return to ensure the amount stands cancelled. You’ll need to specify the full quantity of the supply in Box 6 and 7 of the vat return form in order to complete your reverse charge vat claim. However, you will need to convert the currency of the vat paid in a foreign country to sterling before you decide to fill out the amounts in those boxes.
This reverse charge process can also be called tax shift and you can go for this type of vat reclaim only when you’re a vat registered trader in Britain. In order to be a vat registered trader, your taxable sales need to cross 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 your customers and file regular vat returns then any services rendered by you from 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 are not very difficult, it is always preferable to opt for the services of a proficient vat agent that can handle all 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 previously been taken care of services rendered by a foreign company within and out the UK.