If you are a vat registered trader in Britain 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 will allow you to first pay vat and then cancel it out so your net cost doesn’t increase.
If you are 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 obtained such services in Britain itself from a supplier located in a eu country. All 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 in conjunction with the European Community simplification regulations.
If you have a bit difficulty in interpreting these vat rules then you should enrol the services of a good customs and excise customs vat agent having a wide reach in most eu countries that practise vat. This kind of agent vat validation would surely understand all uk vat and eu vat regulations and could enable 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 covered specified services while filing your vat returns itself. If you are in the UK then you’ll have to calculate and indicate the amount of paid in Box 1 of the vat return form. You will then need to specify the same amount in Box 4 of that return so that the amount stands cancelled. You’ll have to specify the total quantity of the provision 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 the foreign country to sterling before you fill out the amounts in those boxes.
This reverse charge process can also be known as tax shift and you can go for such a vat reclaim only when you’re a vat registered trader in Britain. In order to become a vat registered trader, your taxable sales have to go over ?70,000 in the last 1 year while you may even apply before vat threshold amount may be 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 issued by hmrc vat department.
Although following vat rules usually are not really hard, it is always preferable to opt for the services of an proficient vat agent that can handle all of 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 which may have already been paid for services rendered by way of a foreign company within or outside the UK.