Know everything about the increase in hmrc vat rates in the coming year

If you have a running business in the UK or intend to start one then you should know all about the increase in hmrc vat rates in the coming year. This should help you to quickly incorporate all the necessary modifications to your vat invoices and vat returns, and help you to keep on running your business without any interruptions.

Much like other Countries in Europe, the United Kingdom too has embraced vat or value added tax as a system for avoiding double taxation on goods and reducing tax leaks. In case 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 that will need to be mentioned in each vat invoice which you issue to your 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 greater detail.

Currently, the United Kingdom has 3 vat rates as decided by the hm revenue and customs department or hmrc. The standard vat rates are 17.5% that is slated to increase to 20% from January 4, 2011. You will thus need to issue tax invoices with the new standard rates from January 4, 2011 onwards as well as 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 stay the same. In order to be secure and safe, you should however, ask your vat agent or consultant to stay glued to any or all changes in uk vat in addition to eu vat rules, particularly 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 will be changed to incorporate the change in standard vat rates. However, for those who have already paid vat on products or services abroad before these were imported to the UK then you’ll be in a position to ask for vat reclaim by filling out the requisite vat form. In the case of any doubts you could go to the hmrc vat website whilst utilizing various vat online services provided by the department. Several 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 own business before, during and following the alternation in vat rates. This should help you to file your vat returns correctly while also charging revised vat rates to the customers. You may anyway also disclose any errors that may have already been committed through the transition period to the hmrc department and even make necessary adjustments within your next vat return as specified by them.

The increase in standard vat rates from 17.5% to 20% from January 4, 2011 will lead to a marginal increase in costs. However, this variation will also have to be reflected in coming vat returns and calculations. You should make it a point to know all about the rise in hmrc vat rates in the coming year so your business has a seamless transition into the New Year.