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 was already paid. This vat procedure allows you to first pay vat and after that cancel it so your net cost does not increase.
If you’re a trader that utilizes services of foreign companies, especially 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 received such services in Britain itself vatcheck.com/vat from a supplier situated in a eu country. All these factors would end up boosting 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.
If you have a lttle bit difficulty in interpreting these vat rules you then should enrol the expertise of a competent customs and excise customs vat agent with a wide reach in most eu countries that practise vat. Such an agent would surely understand all uk vat and eu vat regulations and could enable you to claim reverse charge vat that may have already been paid to a foreign company situated in another country together with a vat-friendly eu country.
You can reclaim vat already covered specified services while filing your vat returns itself. If you are in Britain then you’ll have to calculate and indicate the amount of paid in Box 1 of the vat return form. You’ll then need to specify the same amount in Box 4 of the return to ensure the amount stands cancelled. You will also have to specify the full amount 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 the vat paid in a 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 such a vat reclaim only if you’re a vat registered trader in the UK. In order to become a vat registered trader, your taxable sales have to go over ?70,000 in the last 1 year although you may even apply before vat threshold amount has been achieved. Once you start charging vat to the customers and file regular vat returns then any services rendered by you from an overseas company can be reclaimed back in future vat returns, provided you follow all necessary guidelines from hmrc vat department.
Although following vat rules usually are not very difficult, it is always better to opt for the services of proficient vat agent that can handle all of your vat requirements seamlessly. This will likely allow you to concentrate on boosting your business while your vat agent files for reverse charge vat and recovers your taxes that have already been taken care of services rendered by way of a foreign company within or outside the UK.