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

In case you have a running business in the UK or plan to start one you then ought to know everything about the rise in hmrc vat rates in the coming year. This should help you to quickly incorporate all the necessary changes in your vat invoices and vat returns, and help you to keep on running your business without any interruptions.

Much like 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. 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 into a vat registered dealer. This move will allow you to obtain a vat number which will have 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 need to mention all applicable vat rates and amounts in greater detail.

Currently, the United Kingdom has 3 vat rates as decided by the hm revenue and customs department or the 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 with 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 remain 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 stay glued to all changes in uk vat in addition to eu vat rules, particularly if you import goods or services 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 include the modification 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'll still be in a position to ask for vat reclaim by completing the requisite vat form. In the case of any doubts you could visit the hmrc vat website whilst utilizing various vat online services provided by the department. 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 business before, during and following the change in vat rates. This will help you to file for your vat returns correctly while 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 increase in standard vat rates from 17.5% to 20% from January 4, 2011 will result in a marginal increase in costs. However, this change will also have to get reflected in coming vat returns and calculations. You need to make an effort 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.