Know all about the increase in hmrc vat rates from the coming year

If you have a running business in the UK or plan to start one you then should know all about the rise in hmrc vat rates in the coming year. This should help you to quickly incorporate all the necessary changes in your vat invoices and vat returns, and enable you to keep on running your business without any interruptions.

Just like other Countries in Europe, the UK too has embraced vat or value added tax to be 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 you’ll be able to make an application for vat registration and turn into a vat registered dealer. This move will allow you to receive a vat number which will have to be mentioned in each vat invoice that you issue to the customers. This vat invoice will also have to say the vat rate charged and your vat returns too will have 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 rates are 17.5% which is slated to increase to 20% from January 4, 2011. You will thus have to issue tax invoices with the new standard rates from January 4, 2011 onwards and also 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 remain glued to any or all changes in uk vat in addition to 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 will 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’ll be in a position to ask for vat reclaim by completing the requisite vat form. In case of any doubts you could go to the hmrc vat website whilst utilizing various vat online services provided by the department. Several other eu countries too have either raised or intend to raise vat rates in the future as many countries had offered special rates to tide over the economic recession.

It is thus essential that you clearly comprehend the implications of increased vat rates on your own business before, during and following the change in vat rates. This will help you to file for your vat returns correctly while also charging revised vat rates to the customers. You can anyway also disclose any errors that might have already 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 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 will also have to get reflected in coming vat returns and calculations. You should make an effort to know all about the rise in hmrc vat rates in the coming year so your business has a seamless transition to the New Year.