Brexit Changes – VAT\GST Refunds Part 3
Continuing our series on Brexit changes, we take a look at changes to the rules for recovery of VAT\GST incurred in the UK after 1 January 2021.
Firstly, a brief refresher. Businesses which operate in countries where they are not established, or VAT\GST registered can often incur large amounts of VAT\GST on expenditure in those countries. Common examples include employee hotel and travel, exhibitions, conferences, purchase of certain goods etc. Overseas business should in principle be able to recover some or all of the VAT\GST they incur in the UK or European Union (“EU”).
At the end of 2020, the UK Brexit transition period will end. From the start of January 2021, the UK will be treated the same as any other non-EU country. This will have an impact on UK businesses incurring VAT\GST in EU countries as well as EU businesses incurring VAT\GST in the UK.
UK Businesses Claiming VAT\GST Refunds in the EU
Until the end of 2020, UK businesses are able to make use of the EU VAT\GST refund system to recover VAT\GST incurred in the EU. The EU VAT\GST refund is a streamlined process under which EU businesses can submit VAT\GST claims from their tax authority who after undertaking basic checks submits the claim to the relevant EU country. Any VAT\GST incurred before 1 January 2021 can continue to be recovered via the EU VAT\GST refund system until 11pm (UK time) on 31 March 2021 after which time the facility will no longer be available.
VAT\GST incurred from 1 January 2021 will need to be claimed directly from the relevant EU member state under what is known as the 13th VAT\GST Directive. This is in line with the current position for non-EU businesses. This is a more time-consuming and costly process and in some EU countries it is necessary to appoint agents to deal with the claim on your behalf.
EU Businesses Claiming UK VAT\GST Refunds
If you are an EU business, and you have incurred VAT\GST before 31 December 2020, you can still recover the UK VAT\GST by submitting an EU refund claim in the country where you are established. Claims can only be made until 31 March 2021 after which time the ability to claim through your own EU member state tax authority will cease.
Any UK VAT\GST incurred after 1 January 2021 will need to be recovered using the procedure under which the claim is submitted direct to the UK tax authorities. This is similar to claims currently made by non-EU located businesses. These claims can start to be submitted from 1 April 2021.
There are strict time limits for such claims and claims need to be submitted within 6 months after the end of the ‘prescribed year’ when you were charged the VAT\GST. The prescribed year runs from 1 July to 30 June, so you must make a claim by 31 December. If you miss the deadline, the UK tax authorities will not accept the claim. Generally, the UK tax authorities do not require businesses to appoint tax agents and do not require reciprocal treatment in the claimant’s country before repaying a claim.
The rules for submitting claims are complex and we would be delighted to assist you. If you have incurred VAT\GST in the UK or in any other country, please get in contact to see if we can help you to recover the VAT\GST. WAY2VAT provides a fully automated end to end VAT\GST reclaim solution.