Know all about the rise in hmrc vat rates in the coming year

In case you have a running business in the United Kingdom or intend to start one you then should know everything about the rise in hmrc vat rates from the coming year. This will help you to quickly incorporate all the necessary changes in your vat invoices and vat returns, and help you to keep on running your business without any interruptions.

Much like most other Countries in Europe, the UK too has embraced vat or value added tax to be a system for avoiding double taxation on goods and reducing tax leaks. If your current taxable sales exceed £70,000 pounds during the past 12 months you’ll be able to apply for vat registration and turn into a vat registered dealer. This move will allow you to obtain a vat number which will have to be mentioned in each vat invoice that you issue to the customers. This vat invoice may also have to mention the vat rate charged and your vat returns too will need to mention all applicable vat rates and amounts in detail.

Currently, the UK has 3 vat rates as decided by the hm revenue and customs department or the hmrc. The standard vat rates are 17.5% that is slated to increase to 20% from January 4, 2011. You’ll thus have to issue tax invoices with the new standard rates from January 4, 2011 onwards and also file your vat return in line with the new vat rates. The lower vat rate of 5% is slated to remain similar to well as the zero vat rate. Vat exempt rates and classifications too are slated to remain exactly the same. In order to be on the safe side, you should however, ask your vat agent or consultant to remain glued to any or all changes in uk vat as well as eu vat rules, especially if you import goods or services from member EU countries that follow vat.

Come January 4, 2011 and the vat threshold limit, and also the flat rate vat scheme limit too might be changed to incorporate the modification in standard vat rates. However, for those who have already paid vat on products or services in another country before these were imported to the UK then you will be able to request vat reclaim by filling out the requisite vat form. In the case of any doubts you can always go to the hmrc vat website while also utilizing various vat online services provided by the department. Other eu countries too have either raised or intend to raise vat rates in the future as many countries had offered special rates to tide over the economic recession.

It’s thus important that you clearly comprehend the implications of increased vat rates on your business before, during and after the change in vat rates. This should help you to file your vat returns correctly while charging revised vat rates to the customers. You may anyway also disclose any errors that might have been committed during the transition period to the hmrc department and even make necessary adjustments within your next vat return as per them.

The rise in standard vat rates from 17.5% to 20% from January 4, 2011 will lead to a marginal rise in costs. However, this change may also have to get reflected in coming vat returns and calculations. You should make it a point to be aware of all about the rise in hmrc vat rates within the coming year so that your business carries a seamless transition to the New Year.