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 you then should know everything 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 enterprise without interruptions.

Much like other Countries in Europe, the United Kingdom 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 during the past Yr you’ll be able to apply for vat registration and turn into a vat registered dealer. This move will allow you to obtain a vat number which will need to be mentioned in each vat invoice that you issue to the customers. This vat invoice may also have to mention the vat rate charged and your vat returns too will have 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 standard vat rates are 17.5% that is slated to increase to 20% from January 4, 2011. You’ll thus need to issue tax invoices with 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 vat verification exactly the same. 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, 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 might be changed to include the modification in standard vat rates. However, for those who have already paid vat on goods and services in another country before they were imported into the UK then you’ll still be able to request vat reclaim by filling out the requisite vat form. In case of any doubts you can always visit the hmrc vat website whilst utilizing various vat online services offered 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’s thus essential that you clearly understand 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 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 through 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 increase in costs. However, this change will also have to get reflected in coming vat returns and calculations. You need to make it a point to be aware of all about the increase in hmrc vat rates within the coming year so your business has a seamless transition to the New Year.