Insights

Due to Brexit, there are now different rules in respect of the EU VAT refund process. UK businesses can no longer use the 8th Directive refund portal that was on HMRC’s website making it a complicated process which may cause confusion for some business owners.

This article explains the current rules and the detail below applies for businesses located in the UK (including the Isle of Man) incurring EU VAT and also for businesses from outside the UK that incur UK VAT.

Northern Ireland based businesses can still use the 8th Directive electronic cross-border refund system for VAT incurred in EU countries.

UK businesses incurring EU VAT

Whilst UK businesses may still reclaim VAT incurred in the EU after Brexit, the process to follow depends on the EU country involved.

It is therefore necessary to consider the individual Member State’s rules in which you have incurred the VAT. Details are available on the EU Commission’s website. UK businesses may need to provide a certificate of status to get a refund too.

Non-UK businesses incurring UK VAT

Provided goods are not being purchased for export, any non-UK based business will be charged UK VAT on UK goods. If they do not have a UK VAT registration, the input tax incurred can only be reclaimed through the UK’s official scheme. This is provided the business is eligible as per the following criteria:

To reclaim UK VAT, the non-UK business must:
• Not be registered nor required or eligible to be registered in the UK,
• Have no place of business nor make any supplies in the UK. Certain transport services and supplies where the customer pays the VAT are potential exceptions to this rule.

Use of this rebate scheme will be refused if an equivalent scheme exists in the claimant’s EU country but UK businesses are blocked from using it; in other words there must be a reciprocal agreement.

Qualifying supplies

VAT can be reclaimed on all goods and services purchased in or imported into the UK. The reclaim scheme excludes the following items:

• Non-business supplies
• Items used to make a supply in the UK
• Certain second-hand goods
• Business entertaining, other than some entertaining of overseas customers
• Goods and services purchased to sell for the benefit of travellers
• Any supplies used to make exempt supplies outside the UK
• Goods located in Northern Ireland.

In the case of cars, private purchases are not eligible for a VAT rebate and 50% of VAT costs can be reclaimed for privately used leased cars.

Wherever a supply of any service or goods has a mixed business and private use, VAT for the business portion only can be reclaimed.

If goods are exported, they can be zero-rated providing the required evidence is available.

VAT can be reclaimed on any imported goods provided they do not make the business liable to register for UK VAT.

How to make claims

Claims for VAT rebates are based on an annual period which ends on 30 June

All claims must be submitted by 31 December of the calendar year.

Claim periods should span at least three months unless the period end date is after 30 June in which case a shorter period is acceptable.

The value to be reclaimed over a 12 month period must be at least £130 and over £16 for a shorter period. Any missed items can be added onto future claims as long as they related to VAT charged in the year of the application.

When submitting a claim, a certificate showing the business is registered in their home country must be included with the initial application and then provided as needed thereafter. Electronic certificates may be acceptable with HMRC approval.

When submitting a claim, original invoices must be submitted which need to include the following information:

• The supplier’s name, address and VAT number.
• The date of the supply.
• Details of the goods/services supplied.
• The VAT inclusive cost of the supply.
• The rate of VAT applied.

Where the value of the supply is greater than £250 some additional information is required as follows:

• Identifying number.
• The customer’s name and address.
• The amount of VAT charged.
• The VAT exclusive cost of the supply.

In cases where goods have been imported, original customs documents showing the VAT paid must also be supplied.

If you would like advice or help with the paperwork relating to making VAT rebate claims, please contact us via partners@rjp.co.uk.