Reclaims by UK Businesses of VAT incurred in Other Member States

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UK businesses can sometimes be charged EU VAT when receiving services from providers established in other EU Member States. In particular, VAT can arise when employees of UK companies are required to travel overseas.

More than often this VAT can be reclaimed. However, recovery is dependent upon the UK business (“the Claimant”) satisfying various strict conditions.

Qualification required to reclaim VAT incurred

In order to qualify for a refund, the Claimant must:

  • not be VAT registered , liable or eligible to be registered in the Member State from which the claim is made (i.e. the Member State of Refund (“the MSR”));
  • have no fixed establishment, seat of economic activity, place of business or residence in the MSR;
  • not have supplied, during the refund period, any goods or services in the MSR with the exception of:
    • transport services and services ancillary thereto;
    • supplies of goods or services where VAT is payable by the person to whom the supply is made.

Criteria must be satisfied by the MSE.

Basic registration checks will be carried out by the Member State of Establishment (MSE) before the refund application is forwarded electronically to the Member State from which the refund is being claimed.

The MSE will not forward the application to the MSR if any of the following, amongst others, apply in any period of refund:

  • The applicant is not a taxable person for VAT purposes;
  • The applicant makes only exempt supplies.

Refundable and non-refundable VAT

The VAT must be incurred for business purposes. VAT can be claimed on goods and services purchased during the refund period, as can VAT on goods imported into the UK during the refund period. In the main, the following cannot be reclaimed:

  • VAT on the purchase of a motorcar;
  • VAT on goods and services used for business entertainment;
  • VAT on goods and services used for non-business activities.

Where, however, VAT is incurred for hiring or leasing a motorcar, in the UK, only 50% of the total VAT charged may be reclaimed.

There will also be restrictions on what can be claimed specific to each Member State.

Prescribed years and time limits

Claims must be made no later than nine months after the end of the “prescribed year” in which VAT is incurred. The prescribed year is the calendar year, so for VAT incurred in 2009 claims must be made by 30 September 2010. The date VAT is incurred is usually the date on the invoice and not the date of payment. These time limits are strictly applied.

Minimum and maximum amounts

There is no upper limit to the refund claim.

There are de-minimis limits: If the claim relates to a period of less than one year but not less than three months it must be for at least €400 or equivalent in national currency; If the claim relates to a whole year or the remainder of a year it must be for at least €50 or the equivalent in national currency.

Claims process

A UK business that wishes to make claims for recovering VAT incurred in another EU Member State for 2009 will have to register on the UK portal via the Government Gateway. Separate claims will need to be submitted for VAT incurred in each Member State.

4 January 2010

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About Throgmorton: Throgmorton is one of the leading companies specialising in the provision of financial and administrative outsourcing in the UK SME financial services sector.

The information in this notice is intended for general guidance only. Throgmorton does not accept any responsibility for losses incurred to any person acting or refraining to act as a result of the information in this notice. Advice should be taken in the context of specific circumstances.