UK Businesses Buying From Other EU Countries And How To Claim VAT?

In this day and age of digitalisation & globalisation, imports & exports have become increasingly popular. For example – e-bay and amazon trade have increased more than 10 times in last decade alone.

Such online selling and buying does generate some complexity in relation to taxes and especially VAT. When buying and selling online in EU, business can claim back VAT which we reckon many are not even aware. Remember all VAT registered business can claim VAT in the country they are registered in relation to sales and purchases. What if you are selling or buying stuff in the country where you are not VAT registered. Key is understanding administration of VAT and how to make claims.

If you are a VAT registered user in UK, you can claim your VAT for the goods & services you purchase in EU country with the help of VAT refund scheme. You can easily claim your VAT from EU country if –

• You are not a VAT registered user in that EU country
• You are not having a business place or residence in that EU country.
• You are not making any supplies unless –
  1. There are transport services for the international carriage of goods.
  2. The person to whom you are supplying goods pays VAT on them.

What Can Be Claimed?

Business owners are entitled to get refunds for most of the goods & services you purchased for your business from EU country subject to rules of each EU country (where purchase has been made) in relation to:

1. Each EU country rules & regulations on how much amount of VAT you can claim.
2. The rules regarding input tax claiming are slightly different in each EU country.
3. Each EU country has set a limit for minimum refund amount.
4. In case your business makes both taxable & exempt supplies, you may not be able to reclaim all the VAT you have paid in the EU country.

What Cannot Be Claimed?

1. In case you bring in goods from another EU country as they are called acquisitions.
2. In case you purchased goods & services for resale.

Goods you bring in to use in your business from another EU country will be considered as zero rated (No VAT is payable) if –

1. Your EU VAT number is mentioned on the supplier’s invoice (For UK VAT registered business)
2. The supplier has evidence to show that the goods have been sent.

You cannot claim VAT if you are VAT registered user in UK and importing the goods in UK from outside EU.

VAT Return Amount Which You Can Claim

It totally depends upon EU country that how much minimum amount you can claim as it varies between EU countries but generally –

1. The minimum amount businesses can claim for a period covering more than 3 months to less than a year is 400 euros.
2. The minimum amount businesses can claim for the entire year or the period between your last claim & the end of the year is 50 euros
3. If the total VAT amount is less than 50 euros, it cannot be reclaimed back.

Time Limits for Claiming VAT

The last date of claiming VAT is 30th September of the following year in which you were charged VAT.

1. Less than 3 months
2. More than a calendar year

Note - You can also claim for items you missed at the time of filing earlier claims if they were incurred for the year you are claiming for.

Making A Claim

You can easily claim your refund using VAT online services and to avail these services, online registration is mandatory. You need to register as soon as possible online as registration can take up to 7 days.

In case any other person such as accountant or agent after getting your permission act on your behalf and make the claim, he or she must be registered online to avail VAT online services.

In case business has incurred VAT charges in more than one EU country, separate claim must be filed separately for each country.

1. Fuel
2. Cost of hiring transport
3. Transport expenditure
4. Travel expenses (Taxi fare or public transport cost)
5. Accommodation expenses
6. Admissions to fair & exhibitions
7. Road tolls & road use charges
8. Food, drink & restaurant services
9. Expenditure on amusements, luxuries & entertainment.
10. Other expenses

Evidence Required For Claiming VAT Refund

You must have a proper evidence to prove the information you have submitted in your claim. There is no need to send any paper invoices or other documents at the time of submitting your claim. Some countries tell you to scan the invoices and share with them by attaching the same with the claim but they will generally not tell you to do so for –

1. Purchases or imports less than 1000 euros
2. Fuel purchases less than 250 euros

You must maintain all original invoices and other documents as it supports your claim and may be needed at some future date.

Time Period & Payment

When you submit your claim to HMRC, you get the acknowledgement from them in the form of reference number. It is important to maintain the record of reference number as it may be required by you in case of any query right now or at some future date.

HMRC accepts your claim and sends the same to the tax authority of the country where you are applying for refund claim. Member state of refund (MSREF) is responsible for making refunds. HMRC cannot act or intervene and all your claim queries should be made with MSREF.

In case the refund has not been paid within the time period, you also become eligible for the interest which will be calculated and paid by MSREF. Generally, refunds are paid by credit transfer in the currency of MSREF.

VAT Claims Which Are Refused

Sometimes claims are refused by MSREF due to some reason but you are having the right to appeal against that decision as per their country procedure. HMRC cannot help or intervene in this matter.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.