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Tax alert: Businesses can reclaim VAT on their UK business expenses

Tuesday, November 8, 2011 - 14:26 | Posted By: The Privately Held Business Team
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What is VAT?
The VAT in the European Union is a general, broadly based consumption tax assessed on the value added to goods and services. It operates on the same basic principles as GST in Australia.

Refund mechanism for Australian businesses with no establishment in the EU
The European 13th Directive VAT refund mechanism may allow businesses established outside of the EU to increase their bottom line by reclaiming  VAT incurred on business expenses.

Refund opportunities may exist for  businesses if they are:

  • employing staff travelling to the UK on business
  • incurring branch office expenses
  • incurring UK VAT on business-related expenses
  • retaining the original invoices (e.g. as part of the expense reports submitted by  employees)
  • not registered,  liable or eligible to be registered for VAT in the UK
  • without a place of business or other residence in the EU


Strict time limits
Time limits are applied strictly in the UK. If a claim is not submitted on time, the potential VAT refund may be lost.

Businesses must submit their reclaim application forms no later than six months after the end of the 'prescribed year' in which they incurred the VAT in the UK. The 'prescribed year' runs from 1 July to 30 June.

For invoices dated between 1 July 2010 and 30 June 2011, the claim deadline is therefore 31 December 2011.

Required documentation
To submit a valid claim, a business will need to submit the following documents:

  • a valid signed VAT reclaim form
  • original certificate of status/certificate proving business activity that must be valid at the time of the claim
  • original valid VAT invoices
  • in the case of goods imported, the correct import VAT certificate


A new opportunity to claw back UK VAT?
Australian businesses will be familiar with the limitations of the 13th Directive VAT refund mechanism procedure. However, following a recent judgment in the UK, Australian businesses and sectors previously impacted may now benefit. This includes those businesses involved in banking, the provision of financial and financial intermediary services, insurance and insurance brokerage, betting and gaming activities, provision of health and welfare services, cultural services, educational services and dealing in land. Australian businesses may also be able to claim VAT on costs relating to flotations and other stock market transactions which have previously not been claimable.

Types of business expense
Generally, from 1 January 2010, UK VAT is not applicable on the majority of services provided to a business established outside the EU. However certain costs are likely to incur local VAT.

This is not an exhaustive list, but provided businesses have original invoices to support a claim, there is the opportunity to recover VAT on the following expenses, provided they were incurred for business purposes:

  • hotel invoices
  • professional fees (certain)
  • meals
  • conferences, trade shows, etc
  • car rental
  • training courses, seminars, etc
  • fuel
  • tooling costs
  • line rental
  • warranty costs


Restrictions on the goods and services qualifying for a claim
A claim cannot be made for:

  • supplies of goods or services for non-business use 
  • supplies used or to be used to make a taxable supply in the UK
  • supplies used or to be used to make a VAT exempt supply outside the United Kingdom 
  • the supply or importation of most ordinary business cars
  • certain second-hand goods for which no tax invoice will be issued 
  • business entertainment/hospitality expenses 
  • goods for export 
  • goods and services bought for resale


Timeframe for refund
If a claim is accepted by the UK tax authority (HM Revenue and Customs), the refund should be made within six months of the submission of the claim.

How Grant Thornton can help
Grant Thornton has an international network of Indirect Tax specialists.  You will have access to these VAT specialists throughout the United Kingdom and the European Union through Grant Thornton International’s network of member firms. These specialists have the practical experience and technical knowledge to assist you with compliance and strategies to manage the impact of VAT on your business.

If you would like to discuss the possibility of making a claim, or you require assistance with compiling and submitting one, simply contact us and we will be happy to help.

Krish Patel
National Head of Indirect Tax
T  +61 2 8297 2400
krish.patel@au.gt.com

Mark Azzopardi
National Head of Tax
T  +61 3 8663 6000
mark.azzopardi@au.gt.com

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