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

In case you have a running business in the United Kingdom or intend to start one then you should know everything about the rise in hmrc vat rates from 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 interruptions.

Just like other Countries in Europe, 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 12 months then you can make an application for vat registration and turn a vat registered dealer. This move will allow you to receive a vat number that will need 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 UK has 3 vat rates as decided by the hm revenue and customs department or hmrc. The regular vat rate is 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 as well as file your vat return based on the new vat rates. The lower 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 remain exactly the same. To be secure and safe, you should however, ask your vat agent or consultant to stay glued to any or all alterations in uk vat in addition to 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 will be changed to incorporate the change in standard vat rates. However, for those who have already paid vat on products or services abroad before these were imported to the UK then you will still be in a position to request 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 provided by the department. Several other eu countries too have either raised or intend to raise vat rates in the near future as many countries had offered special rates to tide over the economic recession.

It’s thus essential that you clearly comprehend the implications of increased vat rates on your own business before, during and following the alternation in vat rates. This will help you to file for your vat returns correctly while 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 also make necessary adjustments in your next vat return as per them.

The rise 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 everything about the increase in hmrc vat rates in the coming year so your business has a seamless transition into the New Year.