VAT Reclaims for non-EU Companies

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Where a business is established outside of the EU, it can use a scheme, referred to as the 13th Directive Refund, to reclaim VAT paid in the UK. This scheme is subject to the business:

  • not being registered, liable or eligible to be registered for VAT in the UK;
  • having no place of business or other residence in the EU; and
  • it does not make any supplies in the UK (other than transport services related to the international carriage of goods, or services where VAT is payable by the business in the UK to whom the supply is made).

It is a condition of the refund claim that your own country allows similar concessions to UK traders in respect of its own turnover taxes. But your application will only be refused on these grounds if your own country has a scheme for refunding these taxes, but refuses to allow UK traders to use it.

Typically, VAT can arise when employees of overseas companies are required to travel to the UK.

Prescribed years and time limits

Claims must be received by the UK tax authorities no later than six months after the end of the “prescribed year” in which VAT is incurred. The prescribed year is the twelve months from 1 July to 30 June so that, for example, claims for the 12 months ended 30 June 2010 must be made no later than 31 December 2010. This time limit is strictly applied.

Minimum and maximum amounts

There is no upper limit to the refund claim.

There are minimum claim amounts, however, that can be refunded. When an application is for the full twelve months of the “prescribed year” or the application covers less than 3 months if this is all that remains of the “prescribed year”, the amount of VAT claimed must not be less than £16. Claims can be made for less than the full 12 months provided the period covered is at least three months and the minimum VAT claimed is at least £130.

Claims process

There are various formalities that need to be strictly applied if claims are to be accepted.

When making the first claim in the UK, a business must also include a certificate from the official authority in their own country showing that they are registered for business purposes there. When applying for the certificate, it is important to make sure that it shows all the information that the UK authorities will need to process the claim.

The certificate must be an original (not a photocopy) and contain:

  • the name, address and official stamp of the authorising body;
  • the claimant’s name and address;
  • the nature of the claimant’s business; and
  • the claimant’s business registration number.

Each certificate is valid for twelve months from its date of issue and will cover any claims made during that year.

For US companies, for instance, the first claim must include an original certificate from the US official authority proving business registration. An original Form 6166 which can be obtained from the IRS Certificate Unit in Philadelphia satisfies this requirement. This certificate has to be renewed each 12 months.

Adequate proof of the VAT incurred must be included with each claim. Only the original supplier VAT invoices, vouchers or receipts (i.e. not a copy), showing all of the following details will be acceptable:

  • the invoice number;
  • the supplier’s name, address and VAT registration number;
  • the Claimant’s name and address;
  • details of the goods or services acquired;
  • the date of supply;
  • the cost of the goods or services (excluding VAT)
  • the rate of VAT; and
  • the amount of VAT charged.

The above requirements are relaxed in various ways for individual expenses of £250 or less (including VAT). For hotel and subsistence costs, it is sufficient for the name of the travelling employee to be on the supplier’s invoice in place of the Claimant’s name provided proof of employment is also submitted with the claim.

Claims can be submitted either by the Claimant or, on behalf of the Claimant, by an authorised agent. Where an agent is involved, a Power of Attorney or letter of authority must be completed and submitted with the first claim.

Timing of refunds

Refunds will be made within six months of receiving a satisfactory claim. Repayments can be refused, in which case a reason will be given and the decision can be appealed within 30 days.

Non- reclaimable VAT

Certain specified VAT costs are not refundable.  These include: VAT incurred for a non-business purpose; VAT incurred on business entertainment/hospitality expenses; VAT incurred for any supply used or to be used to make a supply in the United Kingdom.

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.