If you’re a vat registered trader in Britain then you can avoid the problem of double taxation on services utilized from foreign companies whenever 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 your net cost doesn’t increase.
If you’re a trader which uses 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 may also have obtained such services in Britain itself from a supplier situated in a eu country. Every one of these factors would turn out boosting your expenses since 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 then you should enrol the expertise of a good customs and excise customs vat agent having a wide reach practically in most eu countries that practise vat. Such an agent vat validation would surely understand all uk vat and eu vat regulations and may help you to claim reverse charge vat that might have been paid to a foreign company situated in another country including a vat-friendly eu country.
You can reclaim vat already paid for specified services while filing your vat returns itself. If you are in the UK then you will need to calculate and indicate how much paid in Box 1 of the vat return form. You will then need to specify the same amount in Box 4 of the return so that the amount stands cancelled. You will also have to specify the total quantity of the supply in Box 6 and 7 in 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 the foreign country to sterling before you fill out the amounts in those boxes.
This reverse charge process can also be called tax shift and you can go in for such a vat reclaim only if you’re a vat registered trader in Britain. In order to be a vat registered trader, your taxable sales need to go over ?70,000 in the last 12 months although you may even apply before vat threshold amount has been achieved. As soon as you start charging vat to your 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 usually preferable to choose services of a proficient vat agent that can handle all your vat requirements seamlessly. This will likely enable you to concentrate on boosting your business while your vat agent files for reverse charge vat and recovers your taxes that have previously been taken care of services rendered by way of a foreign company within and out the UK.