If you are a vat registered trader in the UK 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 was already paid. This vat procedure will allow you to first pay vat and then cancel it so your net cost does not increase.
If you are a trader that utilizes services of foreign companies, particularly those situated in vat-friendly eu countries then you may have already paid vat in those countries. On the other hand, you might also have received such services in the UK itself http://vatcheck.com/vat from the supplier located in a eu country. Every one of these factors would end up 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 little difficulty in interpreting these vat rules then you should enrol the expertise of a competent customs and excise customs vat agent with a wide reach practically in most eu countries that practise vat. Such an agent 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 located 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 Britain then you’ll have to calculate and indicate the amount of paid in Box 1 of the vat return form. You’ll then need to specify exactly the same amount in Box 4 of the return so that the amount stands cancelled. You will also have to specify the full quantity of the supply in Box 6 and 7 of the vat return form in order to complete your reverse charge vat claim. However, you will have to convert the currency of any vat paid in a foreign country to sterling before you decide to fill out the amounts in those boxes.
This reverse charge process can also be called tax shift and you may go in for this type of vat reclaim only if you are 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 previous 1 year while you may even apply before this vat threshold amount may be achieved. Once you start charging vat to your customers and file regular vat returns then any services rendered by you from a foreign 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 really hard, it is always better to opt for the services of proficient vat agent that can handle all your vat requirements seamlessly. This will enable you to focus 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 or outside the UK.