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 allows you to first pay vat and then cancel it so that your net cost doesn’t increase.
If you’re a trader that utilizes services of foreign companies, particularly those situated in vat-friendly eu countries then you might have already paid vat in those countries. On the other hand, you might also have obtained such services in the UK itself 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 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 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 would surely understand all uk vat and eu vat regulations and may help you to claim reverse charge vat that may have already been paid to a foreign company located 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 will have to calculate and indicate the amount of paid in Box 1 vat number search of your vat return form. You will then need to specify exactly the same amount in Box 4 of that return to ensure the amount stands cancelled. You will also need to specify the total 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 any 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 known as tax shift and you can go in for this type of vat reclaim only if you are a vat registered trader in the UK. In order to become a vat registered trader, your taxable sales have to cross over ?70,000 in the last 12 months while you may even apply before 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 from hmrc vat department.
Although following vat rules are not very difficult, it is usually better to choose services of a 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 that have already been paid for services rendered by a foreign company within or outside the UK.