OVERSEAS VAT - 27.10.2022

What’s the procedure to reclaim overseas VAT?

Your business has paid VAT in another country. However, to reclaim the overseas VAT you need a certificate of status from HMRC. What are the procedures for getting this certificate and how long will you need to wait for it to be issued by HMRC?

Paying VAT overseas

Your business might incur costs in other countries and pay overseas VAT on goods or services that you purchase there. In some countries, the VAT rate can be as high as 25%, so is a big part of the purchase price.

Your first challenge will be to ensure that the overseas supplier is correct to charge you VAT, as many services are outside the scope of VAT if they are supplied to an overseas business. You cannot claim incorrectly charged VAT from an overseas tax authority.

Example. If your business uses the services of an accountant in an EU country, they will not charge you domestic VAT. Instead, you will account for VAT on your UK return by doing a reverse charge calculation, accounting for output tax in Box 1 and claiming input tax in Box 4.

Tip. If a supplier has incorrectly charged you overseas VAT , ask them for a credit.

Trap. When doing the reverse charge calculation, you will need to reduce your input tax claim in Box 4 for any private, non-business or exempt use of the service in question.

Reclaim from an overseas tax authority

Assuming the overseas VAT charge is correct, you will be able to claim it back in many cases if your business is VAT registered in the UK. Many countries - including all EU countries - have a reciprocal arrangement with the UK, so that their businesses can claim UK VAT back from HMRC. However, before repaying VAT, the overseas tax authority is likely to ask you for proof of your UK trading status, which will be a certificate issued by HMRC.

New procedures for getting certificates

HMRC will give your business a certificate of status to confirm that you are trading in the UK and registered for VAT. The certificate has always been issued by post but since 1 May 2022, HMRC changed the way it issues the certificates and will now send it to you by email. The certificate includes a link to the UK VAT registration checker, which allows the overseas tax authority to check that your certificate is valid.

Tip. You can apply for the certificate yourself or instruct an agent to apply on your behalf.

Trap. If your company is a member of a VAT group, the certificate will only be issued to the representative member of the group.

To apply, send an email to vat66@hmrc.gov.uk and give the email the subject line “VAT Certificate of Status Request” . You will need to include the name and address of your business, the VAT registration number, and your name, role and contact number. This is likely to take up to 15 working days.

Tip. You will also need to complete a consent form allowing HMRC to correspond with you by email (see The next step ).

For a link to the consent form, visit https://www.tips-and-advice.co.uk , Download Zone, year 13, issue 1.

If your business is likely to make a claim for overseas VAT, it will be sensible to first apply to HMRC for a certificate of status so you have it on file. It does not cost anything and means that you are fully prepared if the overseas tax authority asks for one. The process takes up to 15 working days.