If the UK leaves the European Union without a deal, electronic EU VAT refund claims both to and from the UK will no longer be possible. Such claims will need to be submitted before 29 March 2019, although ideally before the end of February, if following the recent advice published by the French tax office.
EU Directive 2008/09/EC (formerly the 8th Directive) allows EU businesses to claim refunds of VAT incurred in other Member States through a coordinated electronic system.
If the United Kingdom leaves the European Union without an agreement on 29 March 2019, UK businesses will no longer have access to this EU VAT refund system. Conversely, EU businesses will no longer be able to make VAT recovery claims to the UK through their national portal.
This has been highlighted in recent days with the distribution of an email by the French tax office to French businesses and agents who have previously made VAT recovery claims to the UK. They explain that, in a no-deal scenario, as of 30 March 2019, claims for reimbursement can no longer be transmitted via the French portal to the UK and must be submitted directly to the authorities there in accordance with the terms and conditions that will be set. Similar messages have been published by the tax offices in Belgium and Luxembourg whilst Her Majesty's Revenue and Customs (HMRC) in the UK has also published guidance for businesses there.
So, what would be the practical implications of this?
For EU businesses
Currently, an EU company files its claim for a UK VAT refund electronically via their national VAT Refund portal. After verification that the necessary data has been included, the request is then transmitted electronically to HMRC which, within four months, informs the applicant of its decision.
If there is no Brexit deal, this procedure will expire at 23:00 on 29 March 2019. Consequently, it is recommended that businesses wishing to obtain a refund of UK VAT incurred in 2018, make an application before the end of February 2019 so there is sufficient time for the claim to be transmitted. However, that is an advisory date.
From the 30 March, EU businesses wishing to make VAT refund claims to the UK will have to do so by using the existing processes for non-EU businesses. This applies to VAT paid between on or after 1 January 2019 or VAT paid before 1 January 2019, for which the refund application is not generated before 30 March 2019.
As it currently stands this will involve a paper-based application with a requirement for all original invoices/receipts. An application for a refund of VAT incurred between 1 July 2018 and 30 June 2019 will need to be made by 31 December 2019. Please note this is subject to change.
For UK businesses
Currently, a UK company files its claim for an EU VAT refund electronically via HMRC's VAT refund portal. After verification that the necessary data has been included, the request is then transmitted electronically to the relevant EU tax office which, within four months, informs the applicant of its decision.
If there is no deal, this procedure will expire at 23:00 on 29 March 2019 and UK businesses wishing to make an electronic application for VAT incurred in the EU in 2018 will need to do so before this date.
After this date, UK companies will have to follow the procedure provided under the Thirteenth VAT Directive (86/560/EEC) to request refunds of VAT paid in an EU Member State. This applies to VAT paid on or after 1 January 2019 or VAT paid before 1 January 2019, for which the refund application is not generated before 29 March 2019. Hard copies of original invoices and documentation will need to be sent but the process does vary across the EU and businesses will need to make themselves aware of the processes in the individual countries where they incur costs and wish to claim a refund. For example, the deadline for submitting a claim differs by country and some countries will require UK businesses to appoint an agent or fiscal representative. Additionally, several EU Member States will require reciprocal agreements to be put in place to allow applications to be made.
It does need to be emphasised that if an agreement on the exit of the UK from the EU is finalised between the 28 Member States by 29 March 2019, or if an extension to Article 50 is decided, there will be no change to the current EU VAT refund procedures.
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TMF Group has VAT recovery experts based in-country across Europe and beyond. We can help you to successfully submit and maximise your VAT refund claims, wherever you do business and whatever the Brexit outcome.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.