Know everything 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 ought to know all about the increase in hmrc vat rates from the coming year. This should help you to quickly incorporate all the necessary modifications to your vat invoices and vat returns, and enable you to keep on running your business without interruptions.

Just like most other European countries, the UK 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 Yr then you can make an application for vat registration and turn a vat registered dealer. This move will allow you to obtain a vat number that will have 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 regular vat rates are 17.5% which is slated to raise to 20% from January 4, 2011. You’ll thus need to issue tax invoices using the new standard rates from January 4, 2011 onwards and also file your vat return based on the new vat rates. The reduced vat rate of 5% is slated to stay the same as well as the zero vat rate. Vat exempt rates and classifications too are slated to stay exactly the same. In order to be on the safe side, 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 services or goods 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, in case you have already paid vat on products or services abroad before these were imported to the UK then you’ll be able to ask for vat reclaim by filling out the requisite vat form. In case of any doubts you could go to the hmrc vat website whilst utilizing various vat online services offered by the department. Several other eu countries too have either raised or plan 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 own business before, during and following the change in vat rates. This should help you to file your vat returns correctly while also charging revised vat rates to the customers. You can anyway also disclose any errors that might have 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 change will also have to be reflected in coming vat returns and calculations. You should make an effort to be aware of all about the increase in hmrc vat rates in the coming year so that your business has a seamless transition to the New Year.