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 plan to start one you then should know all about the rise in hmrc vat rates in the coming year. This will help you to quickly incorporate all of the necessary modifications to your vat invoices and vat returns, and enable you to carry on running your business without interruptions.

Much like most other Countries in Europe, the UK too has embraced vat or value added tax as 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 then you can apply for vat registration and turn a vat registered dealer. This move will enable you to obtain a vat number that will have to be mentioned in each vat invoice which you issue to the customers. This vat invoice may also have to say the vat rate charged as well as your vat returns too will have to mention all applicable vat rates and amounts in greater detail.

Currently, the UK has 3 vat rates as decided by the hm revenue and customs department or hmrc. The regular vat rate is 17.5% that is slated to increase to 20% from January 4, 2011. You’ll 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 reduced vat rate of 5% is slated to stay similar to well as the zero vat rate. Vat exempt rates and classifications too are slated to stay the same. In order to be on the safe side, you need to however, ask your vat agent or consultant to stay glued to all changes in uk vat as well as 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 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 goods and services abroad before these were imported into the UK then you will still be in a position to request vat reclaim by filling out the requisite vat form. In case of any doubts you could visit 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 numerous countries had offered special rates to tide over the economic recession.

It’s thus important that you clearly understand the implications of increased vat rates on your business before, during and following the change in vat rates. This should help you to file for your vat returns correctly while charging revised vat rates to your customers. You can 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 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 be 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 in the coming year so your business carries a seamless transition into the New Year.