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

If you have a running business in the United Kingdom 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 of the necessary changes in your vat invoices and vat returns, and enable you to carry on running your business without interruptions.

Just like other European countries, 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 in the past Yr then you can make an application for vat registration and turn a vat registered dealer. This move will enable you to receive a vat number which will need to be mentioned in each vat invoice which you issue to your customers. This vat invoice will also have to say 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 the hmrc. The regular vat rate is 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 and also file your vat return in line with 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 on the safe side, you need to however, ask your vat agent or consultant to remain glued to all changes in uk vat in addition to eu vat rules, especially if you import goods or services 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 include the change 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 will still be in a position to ask for vat reclaim by filling out the requisite vat form. In case of any doubts you could go to the hmrc vat website whilst utilizing various vat online services offered by the department. 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 is thus important that you clearly understand 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 might have already 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 result in a marginal increase in costs. However, this variation may 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.