VAT - 17.10.2023

Reclaiming VAT incurred in an EU country

If you buy goods or services from an EU country that you import for use in your UK business, you must usually deal with the VAT ins and outs through your quarterly returns. But what about VAT paid on purchases made while in an EU country?

UK or GB

Before we get into the ins and outs of EU VAT, it’s important to be aware that the rules are different for businesses established in Northern Ireland (NI) compared with those in Great Britain (GB). In this article we only look at businesses established in GB.

For detailed commentary on VAT for NI businesses, visit https://www.tips-and-advice.co.uk , Download Zone, year 24 issue 2.

Post-Brexit claims

For VAT incurred before 1 January 2021 there were two systems for reclaiming VAT on purchases incurred while in an EU country: through HMRC’s EU VAT refund system and through the so-called 13th Directive . The former is now only available to NI businesses, which means the only option for GB VAT registrations is the latter.

What VAT can you reclaim?

Claims using the 13th Directive are only allowed for VAT paid on goods (not services, e.g. a hotel bill) that are for use in your business and purchased by someone on its behalf, e.g. an employee, while in an EU country. For example, an employee buys equipment for their employer in France and brings it back to the UK.

Conditions

To qualify for a 13th Directive refund, your business must not during the period for which you’re making the claim have:

been based in any EU country or territory; or
supplied goods or services in the country where it incurred the VAT other than exempted transport and ancillary services, or services to customers who account for the VAT under the reverse-charge procedure, e.g. where a UK business carries out work for a business registered in an EU country.

Trap.13th Directive claims are often slow to be processed. you can expect to wait months to get the VAT refunded.

Trap. Any EU country may apply restrictions on the type of expenditure qualifying for refunds and require you to appoint a tax representative located in that country. This might make claiming a refund unviable.

Tip. The European Commission’s (EC’s) website includes detailed notes on claim procedures for each of the EU countries (see The next step ).

Other requirements

While there are EU country-specific requirements for making 13th Directive claims, there are some constants. You must have a valid VAT invoice or similar document for the purchase and you must be able to show that the purchase was made for business purposes. To satisfy the latter requirement it’s usually enough to provide your UK VAT registration number to the tax authorities in the EU country.

For a link to the EC’s detailed notes on VAT reclaim procedures for each country, visit https://www.tips-and-advice.co.uk , Download Zone, year 24 issue 2.

Unless your business is established in Northern Ireland, you should make a claim under the EU’s 13th Directive rules. This allows you to reclaim VAT paid on goods but not services bought in the EU. The claim must be made to the tax authorities of the country in which the VAT was paid. The European Commission provides country-specific guides on making a claim. Make sure you obtain a VAT invoice for your purchases.