If you are a vat registered trader in the UK you’ll be able to 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 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 situated in vat-friendly eu countries then you certainly may have already paid vat in those countries. Alternatively, you may also have obtained such services in the UK itself from a supplier located in a eu country. All these factors would end up increasing your expenses as you could 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 along with the European Community simplification regulations.
In case you have a lttle bit difficulty in interpreting these vat rules you then 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. Such an agent vatvalidation.com would surely understand all uk vat and eu vat regulations and could help 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’re in Britain then you will have to calculate and indicate how much paid in Box 1 of the vat return form. You’ll then need to specify exactly the same amount in Box 4 of the return to ensure the amount stands cancelled. You will also have to specify the total 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 have to convert the currency of any vat paid in the foreign country to sterling before you decide to fill out the amounts in those boxes.
This reverse charge process is also called tax shift and you can go for this type of vat reclaim only when you are a vat registered trader in the UK. In order to be 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 has been achieved. Once you start charging vat to your customers and file regular vat returns then any services rendered by you 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 usually are not very difficult, it is usually preferable to choose services of a proficient vat agent that can handle all of your vat requirements seamlessly. This will likely allow you to concentrate 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 and out the UK.