How to claim post-Brexit VAT refundsby
Rickie Lowery explains new processes for UK businesses to claim refunds of EU VAT and for non-UK businesses to claim refunds of UK VAT.
HMRC has updated VAT notice 723A to reflect changes to the VAT refund process. This relates to businesses located in the UK incurring EU VAT and businesses from outside the UK that incur UK VAT. All references to the UK in this VAT notice include the Isle of Man.
Businesses located in Northern Ireland can carry on using the electronic cross-border refund system for obtaining refunds of VAT incurred on the purchase of goods in EU countries.
UK businesses incurring EU VAT
UK businesses can potentially reclaim VAT incurred in the EU since 1 January 2021. The window for reclaiming EU VAT for earlier periods closed on 31 March 2021.
Following the end of the transitional period, the UK must now use the existing processes for non-EU businesses. The exact method varies by EU country – further information can be found on the EU Commission’s website. UK businesses may need to provide a certificate of status to get a refund.
Non-UK businesses incurring UK VAT
Unless you are buying goods for export, any business established outside the UK will be liable to UK VAT on UK purchases. Without a UK VAT registration this input tax can only be reclaimed via the scheme below.
In order to reclaim the UK VAT the 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.
HMRC have confirmed that use of the scheme will be refused where an equivalent scheme exists in the claimant’s EU country but UK businesses are blocked from using it.
VAT can be reclaimed on goods and services purchased in or imported into the UK. However, the scheme cannot be used to reclaim VAT on:
- 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.
The usual restrictions for cars apply, namely a total block for purchases with private use and a 50% block for leased cars with private use. Similarly, where there is private use of a supply, only the business element of the VAT incurred can be recovered.
Exported goods are eligible to be zero-rated with the proper evidence. VAT can be reclaimed on any imported goods provided they do not make the business liable to register for UK VAT.
Claims are made based on an annual period ending on 30 June, claims must be submitted by 31 December. Claims must cover at least a three-month period, unless that would pass 30 June in which case a shorter period is acceptable.
Interim reclaims of less than 12 months must be at least £130; claims covering the whole year or a period of less than three months must be at least £16. Items missed from earlier applications in the same year can be added to later claims.
Form VAT 65A must be used to make the claim.
A certificate showing the business is registered in their home country must accompany the initial application. A further certificate must then be provided each 12 months.
Form VAT 66A can be used for this purpose. Alternatively, an original document from the home country showing:
- The name, address and stamp of the authorising body.
- The claimant’s name and address, which should not be a PO box, except in exceptional circumstances.
- The nature of the business.
- The business registration number.
Electronic certificates may be acceptable with HMRC approval. A printed copy must still be enclosed with the VAT 65A.
The original invoices relating to the claim must be supplied with the form and must show:
- 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 exceeds £250, including VAT, the invoice must also show:
- An identifying number.
- The customer’s name and address.
- The amount of VAT charged.
- The VAT exclusive cost of the supply.
Where goods have been imported, original customs documents showing the VAT paid must also be supplied.
An agent can be appointed to complete the application, however a Power of Attorney or letter of authority must be held in order to do this. HMRC include an example of an acceptable letter at section 3.7.7 of VAT Notice 723A.
HMRC suggests any repayments be made using the SWIFT payment mechanism, however alternative methods are available.
Should an application be rejected the business can request a review and/or appeal to an independent tribunal.