If you have a running business in the UK or plan to start one then you should know all about the increase in hmrc vat rates in the coming year. This will help you to quickly incorporate all the necessary changes in your vat invoices and vat returns, and help you to carry on running your business without any 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. If your current taxable sales exceed £70,000 pounds in the past 12 months then you can apply for vat registration and turn into a vat registered dealer. This move will enable you to receive a vat number that will need to be mentioned in each vat invoice that you issue to your customers. This vat invoice will also have to mention the vat rate charged and your vat returns too will need to mention all applicable vat rates and amounts in detail.
Currently, the UK has 3 vat rates as decided by the hm revenue and customs department or the hmrc. The standard vat rate is 17.5% which 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 and also file your vat return based on the new vat rates. The reduced vat rate of 5% is slated to remain the same as well as the zero vat rate. Vat exempt rates and classifications too are slated to remain the same. In order to be on the safe side, you should however, ask your vat agent or consultant to remain glued to all changes in uk vat as well as eu vat rules, especially 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 will be changed to incorporate the change in standard vat rates. However, in case you have already paid vat on goods and services in another country before they were imported into the UK then you will still be able to ask for vat reclaim by filling out the requisite vat form. In case of any doubts you can always visit the hmrc vat website while also 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 near future as many countries had offered special rates to tide over the economic recession.
It is thus important that you clearly understand the implications of increased vat rates on your business before, during and after the change in vat rates. This will help you to file your vat returns correctly while also charging revised vat rates to your customers. You can anyway also disclose any errors that might have been committed during the transition period to the hmrc department and also make necessary adjustments in your next vat return as specified by them.
The increase in standard vat rates from 17.5% to 20% from January 4, 2011 will result in a marginal increase in costs. However, this change will also have to be reflected in coming vat returns and calculations. You should make it a point to know all about the increase in hmrc vat rates in the coming year so that your business has a seamless transition into the New Year.