Before Brexit your business could reclaim VAT paid on purchases you and your workers made while visiting the EU for work. Now that the UK has exited the EU is there any way to get the VAT back?
EU VAT
When the transition period ended on 31 December 2020 the main VAT changes related to the movement of goods between the UK and the EU (imports and exports) with special rules for Northern Ireland (NI). Where UK VAT is paid on imports, registered businesses can reclaim it in the usual way through VAT returns. There’s also a less obvious change in the system for reclaiming VAT incurred on business expenditure by an individual while visiting an EU country. This is for goods that aren’t immediately exported to the UK.
Which types of purchase?
The sort of expenditure we’re referring to is that incurred on purchases that are used in the country where they are made. For example, hotel rooms, restaurants, costs of attending or putting on an exhibition. Broadly, that means anything which doesn’t involve goods being exported to the UK.
The pre-Brexit system
For purchases made while located in an EU country up to and including 31 December 2020 you were entitled to make a claim not later than 31 March 2021 to recover VAT paid on qualifying expenditure using the special intra-EU system. That’s, of course, no longer possible but it doesn’t altogether rule out reclaiming VAT.
Tip. If your business has a base in NI and is VAT registered it can continue to make claims under the Eighth Directive because of the special Brexit terms agreed with the EU. This also applies if your business is VAT registered in an EU country and you pay VAT on qualifying purchases while in any other country in the EU.
The post-Brexit system
If your business is not located in NI or VAT registered in an EU country, and you or someone in your organisation, e.g. an employee, incurs VAT on relevant purchases while in an EU country you can reclaim it under the rules set out in the EU 13th Directive. The bad news is it’s a cumbersome procedure.
How to get a VAT refund
You must send a claim to the tax authorities in the EU country where the purchase was made. The tax authority will, eventually, refund the VAT paid as long as the UK has an agreement that gives businesses from the country similar rights to reclaim UK VAT on purchases made here.
Country-specific conditions
Despite the unified VAT rules across the EU, each country can impose its own restrictions on the type of expenditure that it will refund the VAT on. Some countries also require you to appoint a local tax representative to handle your claim. Their fees may make the exercise uneconomic. You can find out the requirements of each country on the EU’s taxation website.
To summarise, registered businesses with a base in Northern Ireland or with an EU registration can continue to use the pre-Brexit system to obtain refunds. Other UK businesses can apply to the tax authorities for a refund.
This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit www.indicator-flm.co.uk or call 01233 653500.