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

If you have a running business in the UK or intend 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 enable you to keep on running your business without interruptions.

Just like most other Countries in Europe, the United Kingdom too has embraced vat or value added tax to be 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 apply for vat registration and turn a vat registered dealer. This move will allow you to receive a vat number which will need to be mentioned in each vat invoice which you issue to the 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 hmrc. The standard vat rate is 17.5% which is slated to increase to 20% from January 4, 2011. You’ll thus have to issue tax invoices using the new standard rates from January 4, 2011 onwards and also file your vat return in line with 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 stay the same. In order to be secure and safe, you should however, ask your vat agent or consultant to remain glued to any or all alterations 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 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 abroad before they 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 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 numerous countries had offered special rates to tide over the economic recession.

It’s thus important that you clearly comprehend the implications of increased vat rates on your own business before, during and after the change in vat rates. This will help you to file for your vat returns correctly while also charging revised vat rates to your customers. You may anyway also disclose any errors that may have already been committed during the transition period to the hmrc department and even make necessary adjustments within 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 increase in costs. However, this variation will also have to get reflected in coming vat returns and calculations. You need to make it a point to know all about the rise in hmrc vat rates within the coming year so your business carries a seamless transition to the New Year.