Andrew Needham of VAT Specialists Limited explains how to claim back foreign VAT incurred for business purposes.
New Electronic System - in English!
At some time most businesses send staff on sales trips or to attend exhibitions in other EU Member States. All of these countries have a VAT system so you will be incurring VAT costs that you cannot claim back on your UK VAT return.
An electronic refund system was introduced on 1 January 2010 replacing the previous paper based system. This new system is simpler and quicker than before.
There is an extended period of nine months (rather than the old six month period) in which to submit claims for VAT incurred in the preceding calendar year.
To make a claim for recovering VAT incurred in another EU Member State you have to register on the UK portal via the Government Gateway. When submitting claims, you will need to record some basic details (e.g., name, address, VAT number, bank account details). This information will be stored and automatically transposed onto the individual claim forms for each Member State as each claim is made.
The use of standard fields and codes for information in the new electronic refund system has greatly reduced language problems and where text has to be used the use of English is permitted. Some Member States require invoices with a value of more than EUR 1,000 (EUR 250 in the case of fuel) to be scanned and submitted electronically with the claim. Lesser value invoices should be retained in case the Member States Tax Authority should want to look at them later.
De Minimis Limits for Claims
There are standard de minimis limits for claims that apply in all Member States. If the claim relates to a period of less than one year but more than three months it must be for at least EUR 400 or equivalent. If the claim relates to a whole year or the remainder of a year it must be for at least EUR 50 or equivalent.
Timing of Claims
You can make a maximum of five claims to each Member State per year - essentially one per quarter, plus a final ‘sweep-up’ claim to capture any invoices not previously claimed during that year.
However, businesses do not have to make quarterly claims; for example, it is possible to make two six month claims or one 12 month claim. Claims may not, however, be made for a period of less than three months, unless they are for the remainder of a year.
Once the Tax Authority in the other Member State receives the claim it must be processed within four months and, if approved, repaid within ten working days. If further information is requested the processing period can be extended up to a maximum of eight months. If these time limits are exceeded then interest will be paid.
In the event that a claim is refused in whole or in part, the decision can be appealed. Guidance on appeal procedures in each Member State is available from HMRC. Businesses will be informed about the progress of their refund claims at certain key stages.