Know everything about the rise in hmrc vat rates in the coming year

If you have a running business in the UK or intend to start one then you ought to know everything about the increase in hmrc vat rates from the coming year. This should help you to quickly incorporate all of the necessary modifications to your vat invoices and vat returns, and help you to keep on running your business without any interruptions.

Much like most other European countries, 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 in the past 12 months then you can apply for vat registration and turn a vat registered dealer. This move will allow you to obtain a vat number that will have 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 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 raise to 20% from January 4, 2011. You will 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 the same as well as the zero vat rate. Vat exempt rates and classifications too are slated to stay the same. To be secure and safe, you need to however, ask your vat agent or consultant to stay glued to all changes 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 the flat rate vat scheme limit too might be changed to include the modification in standard vat rates. However, in case you have already paid vat on products or services abroad before these were imported into the UK then you will be able to request vat reclaim by completing the requisite vat form. In case of any doubts you could visit 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 near future as numerous countries had offered special rates to tide over the economic slowdown.

It’s thus important that you clearly comprehend the implications of increased vat rates on your business before, during and after the alternation in vat rates. This should help you to file your vat returns correctly while charging revised vat rates to the customers. You may anyway also disclose any errors that might have already been committed during the transition period to the hmrc department and even 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 be 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 in the coming year so that your business has a seamless transition into the New Year.