For VAT incurred to the end of last year, there will be a final claim available under the simpler and more efficient mechanism applicable to date. Claims can be made via the HMRC portal in the usual way, and HMRC will process and forward on these claims to the relevant EU VAT authority. Separate claims are made for each EU country.
UK businesses have until 31 March 2021 to submit a final claim however, as many claims are subject to additional queries once submitted, businesses may wish to submit well before the deadline. If the business has not already set up this claim functionality on their online portal this may take additional time to do with HMRC, so should be factored in. The usual requirements apply.
For any VAT incurred from the start of 2021, UK businesses will still be able to claim refunds of VAT from the EU. However, they will be claiming as non-EU businesses and this process is less efficient. This claim process varies from country to country across the EU and some countries requiring a reciprocal agreement with the claimants’ country to entertain a claim. Typically, a certificate of status is required along with original invoices. The claim period is the 12 months from 1 July to 30 June of the following calendar year, and claims must be made no later than 31 December. These claims typically entail more administration than the above-mentioned procedures.
The UK provisions for refunding VAT mirror the above, so EU businesses are encouraged to make claims before 31 March 2021 for UK VAT incurred to 31 December 2020. Going forward, post 1 January 2021, it will still be possible to reclaim UK VAT under the alternative procedure. The claim is the 12 months from 1 July to 30 June of the following calendar year, and claims must be made no later than 31 December.
Incurring EU (or UK) VAT on many costs such as hotel bills, local car hire and tickets for attending an event during business trips cannot be avoided, and these claim mechanisms are helpful in permitting periodic (usually annual) VAT recovery. However, where a UK business finds that it is incurring substantial amounts of EU VAT, for example on imports, (or indeed an EU business incurring UK VAT), then this can indicate an inefficient business model, which could benefit from restructuring. Brexit is a good time to review the current business model to ensure it is still fit for purpose.