VAT Refunds in UK – How to Claim

To understand the concept of VAT Refunds better, let’s first break down the terminology called VAT and see what it actually stands for.

VAT, a brief definition:

  • VAT stands for Value Added Tax and comes under the consumption tax category.
  • The United Kingdom government introduced the tax in the year 1973 and is currently one of the largest sources of government revenue.
  • The other sources of government revenue include Income tax, which is imposed on individuals or on business entities and National Insurance, which are paid by employers and workers. It was introduced in the 90’s in the United Kingdom by the National Insurance Act 1911.
  • The tax is collected through the Value Added Tax Act 1994 by Her Majesty’s Revenue and Customs
  • Value Added Tax is an indirect form of tax.
  • 20% is the standard Value Added Tax rate and has been since the 4th of January 2011.
  • Companies whose turnover exceeds the determined threshold need to register themselves for Value Added Tax.
  • The determined threshold is £83,000 as of 2016.
  • Her Majesty’s Revenue and Customs also runs an individual scheme called The Flat Rate Scheme, which allows companies with a turnover of less than £150,000, to pay a determined part of their turnover to Her Majesty’s Revenue and Customs once in every three months. One should contact HMRC for getting more information on the same.
  • Value Added Tax is further divided into three categories whose rates vary from category to category.
  • The first category is standard which has a rate percentage of 20 and is applicable to products such as electrical items, video games, confectionaries and others.
  • The second category is called reduced with a rate percentage of 5 and is applicable to children and maternity products.
  • The third category is called zero-rated with a rate percentage of 0 and is applicable to motor vehicles, its parts, and others.

What are VAT Refunds?

What are VAT Refunds

Getting money in return of the tax paid is called Value Added Tax returns and can be claimed by people visiting Europe or who are a part of Europe and countries such as the United Kingdom. The key points to remember to know if you are eligible for a Value Added Tax return or not are

  • Always make sure that you check the official U.K government website for detailed information and eligibility qualification regarding the Value Added Tax return.
  • VAT Refunds are available only if you purchase the products in the United Kingdom.
  • If you have just come to visit the United Kingdom as a tourist and would return back home, then you certainly are eligible for a Value Added Tax Refund.
  • If you are, and citizen of the country, but are leaving for a period of twelve months or more, then too you are eligible for a Value Added Tax Refund.
  • If you are not a citizen of the country, but are studying or working in the United Kingdom and are leaving for a period of twelve months or more.

What is the standard Value Added Tax rate in the United Kingdom and what is the amount of minimum purchase required?

The standard Value Added Tax rate is 20%, and the minimum purchase amount is £30.

Here are the next set of steps that a person needs to follow if they are eligible for a Value Added Tax Refund.
  • Checking for shops that display the Value Added Tax Refund sign: Yes, not all shops provide a Value Added Tax Refund and if you are particular about the refund, then make sure you check the sign before entering it.
  • Fill out the necessary form: So, after you are done shopping, you can talk with the concerned show them your password, as proof, and then receive your VAT 407 form which has to be filled precisely and without fail for a Value Added Tax Refund.
  • Be extra careful while filling out the form: Yes, make sure that you fill the form precisely. Certain stores also assist with this and if not, then don’t hesitate to clarify your doubts then and there.
  • The procedure of collecting the refund from the customs will then be explained: After your done filling out the form, the concerned person will now let you know how you will receive your refund and what the procedure at the customs is.
  • Make sure you keep all the documents safely: Yes, without the VAT 407 form and your passport, your refund won’t be considered valid and thus make sure you have all these records safely.
  • Time for you to get it approved: At the time of your departure, you would have to show all your documents to the customs officials and get it approved.

Here is a list of documents mandatory to get a Value Added Tax Refund in the United Kingdom

  • Your sales receipt: Make sure you get your sales receipt, as without which the procedure won’t continue and you might not get your Value Added Tax refund.
  • Your passport: Both for leaving the country and for claiming a VAT refund.
  • Your filled VAT 407 form: Once again highly mandatory and needs to be filled with absolute caution.

Amount of money charged for the refund process:

Yes, the retailer might charge you for the VAT refund process, and if you are seeking a Value Added Tax agent, then the fee is definite and might add up to approximately 10-12%.

How to collect the cash after getting stamped at the customs?

With the stamped form, visit that particular store from where you purchased the product, and they would reimburse you on the spot. You can also demand a refund in a different currency. You can receive your refund either on-spot or through your credit card.

Thus by knowing the procedure well and by understanding whether you are eligible or not, you can easily claim your Value Added Tax Refund in the United Kingdom. All that you have to keep in mind is proper documents, filled and stamped VAT 407 form, legal passport, and your sales receipt. These documents have to be produced and without which you would not be able to claim your refund.

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About the author
Blog 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.


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