So (I know it's annoying, but I'm doing it anyway), a client incurs (correctly charged) VAT in France in the furtherance of his business.
Being below the VAT threshold, he is not VAT registered.
"Can I recover the French VAT" he asks. "No", I say. "You need to be VAT registered." This makes sense; why should he be able to recover French VAT, but not UK VAT, after all.
"But I know other people in the EU that, in similar circumstances, are making such claims through a procedure called 'Intra-communautaire'", he says.
HMRC's guidance clearly says that he must be registered, because the claim requires that he is "a taxable person". And I know that the computer will say no, because I know that the only way to actually ask the computer is to be VAT registered. The guidance goes on to say that any application by someone that isn't a "taxable person", will not be passed on to the other authority.
On looking at the 13th directive, there is indeed a requirement that the claimant be a "taxable person".
However, "taxable person" is defined in the 6th Directive as "any person who, independently , carries out in any place an economic activity, whatever the purpose or results of that activity". Further on, the directive provides for "taxable persons" to be registered, and permits member states to exempt "taxable persons" from registration if they are below permissible thresholds. None of that seems to change the meaning of "taxable person" in the directive though. A "taxable person" is a "business person" in VATA terms, whether or not they are registered, as far as I can see.
So it seems EU business can claim the VAT back, without being registered, but UK businesses can't.
Have I got that right? Do HMRC have it wrong? Are UK businesses missing out?
What's a girl to tell her client?