Non UK VAT Reclaims HMRC Tests Electronic Method

November 29, 20220

HMRC is currently testing an electronic method to allow non-UK businesses to recover VAT paid in the UK, when those businesses are not trading in the UK.

Businesses established outside the UK may incur UK VAT as part of their business activities. For example, where an overseas employee stays in a UK hotel on business.

Without a UK VAT Registration Services , this VAT cannot be treated as input tax and so represents a cost to the overseas business. However, under certain circumstances, it may be possible to recover the VAT another way.

Further details can be found in notice 723A, and future section references are in respect of that notice unless stated otherwise.

Eligible Businesses

Any business entity registered in its local jurisdiction can potentially reclaim VAT paid in the UK. There are effectively three conditions the business must meet.

Firstly, it must not be registered, nor be eligible/required to be registered in the UK (see notice 700/1). This would effectively preclude any overseas business that makes (or potentially even intends to make) taxable UK supplies from using the scheme. The exceptions to this are where the supplies are certain transport services or where VAT is payable by the UK customer.

Secondly, the business cannot have a place of business or a residence in the UK.

Thirdly, the applicant’s country must offer a similar concession to UK businesses incurring VAT in their country, though in practice this only leads to a refused claim if the country has a similar scheme but does not allow UK businesses to use it.

Eligible Supplies

VAT can be reclaimed on goods and services purchased in the UK. It can also be recovered on goods imported to the UK, provided no other VAT relief is available.

The usual UK restrictions on VAT recovery apply equally to this scheme, so supplies put to non-business use and most business entertaining is blocked, along with 50% of the VAT on the hire or lease of a mixed-use car. A full list is at section 2.2.

Time And Claim Limits

The prescribed claim period is the 12 months to 30 June each year. Claim periods must be at least three months, unless they start after 1 April, in which case they run to the end of June.

There is no maximum claim amount, but for most periods of less than 12 months a minimum of £130 of VAT must be claimed. For annual claims or for periods less than three months ending on 30 June, the VAT must be at least £16.

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