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

In case you have a running business in the UK or plan to start one you then should know all about the increase in hmrc vat rates from the coming year. This will help you to quickly incorporate all of the necessary changes in your vat invoices and vat returns, and help you to carry on running your enterprise without interruptions.

Much like other European countries, 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 in the past 12 months you’ll be able to make an application for vat registration and turn a vat registered dealer. This move will allow you to receive a vat number which 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 as well as your vat returns too will need to mention all applicable vat rates and amounts in 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% that is slated to increase to 20% from January 4, 2011. You’ll thus need to issue tax invoices using the new standard rates from January 4, 2011 onwards as well as file your vat return based on the new vat rates. The lower 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 stay vat verification exactly the same. In order to be on the safe side, you need to however, ask your vat agent or consultant to stay glued to any or all alterations in uk vat as well as eu vat rules, especially 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 might be changed to incorporate the modification 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’ll be able to request vat reclaim by completing the requisite vat form. In the case of any doubts you could go to 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 future as many countries had offered special rates to tide over the economic slowdown.

It is thus essential 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 charging revised vat rates to the customers. You may anyway also disclose any errors that may have been committed through the transition period to the hmrc department and even make necessary adjustments within your next vat return as per 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 get 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 that your business has a seamless transition into the New Year.