31 december 2019 deadline fast approaching for UK VAT refunds

The time to act is now

It’s that time of year again. You’re getting into the holiday spirit, you’ve made lists of gifts to buy, your recipe books are out, you’ve considered which charities to contribute to this year. But if you are a company registered in a non-EU country and have paid VAT in the UK, then there is one more task you haven’t checked off yet…

31 December 2019 will be the last possible date to submit your refund claims under the EU Directive 86/560/EEC – also known as the 13th Directive – for VAT incurred in the United Kingdom by non-EU businesses from 1 July 2018 through 30 June 2019. Claims can be made for VAT on regular travel expenses such as hotels, car rental, and meals[1], as well as for Accounts Payable invoices, which may easily carry up to thousands of Euros in foreign VAT for intercompany meetings, intercompany recharges, trade fairs, tooling, customer events… VAT is simply everywhere.

Every company – including those in the US — has paid foreign VAT. Yours too! If you disagree, then you were likely part of the estimated EUR 137.5 billion of VAT lost across the EU in 2017, according to the most recent calculations of the European Commission’s VAT Gap Report. This represents a loss of 11.2% of the total expected VAT revenue.

Am I eligible?

If your company is registered in a non-EU country, you are eligible to reclaim VAT paid in the UK, under the following conditions:

  • You are not registered, liable or eligible to be registered for VAT in the UK
  • You are VAT registered or a taxpayer (in the US)
Where should I start?

There are a number of steps that must be followed to ensure non-EU companies can submit successful VAT claims to the UK before the deadline. Most important is to gain access to your data and ensure that the transactional lines and images are reconciled for VAT and fully VAT audited. Additionally, a Certificate of VAT must be filed.

You can fill out your own application using a form called VAT65A or engage an agent to do so on your behalf using a Power of Attorney document.

Tips for successful UK VAT claims for non-EU businesses

Travel expenses: The original invoice is required to claim VAT on travel expenses. Make sure you are able to extract – en masse – all the T&E invoices from your travel expense system such as Concur, MobileXpense, KDS, iExpense or SAP. If you need help, VATBox has direct connections to all commonly used Travel Expense and ERP systems. Second, extract all transactional lines from the Travel Expense System to allow for matching the correct invoice with the employee’s claimed expense during the audit process. Matching is critical to ensure you claim the right amount of VAT (and not overclaim), and that your claim is fully supported by VAT compliant evidence. Third, check whether the submitted expense is eligible in the UK, e.g. meals with guests, or public transportation that in many cases is VAT exempt.

Accounts Payable: With AP, the invoice copy from the ERP system is also required to be audited. Mass image extraction from an ERP is usually much easier, but VATBox IT can assist where needed by deploying and customising any script required to run the data – transactional and image – from your ERP. If your company has dedicated tax codes for Foreign VAT, we will include those in the script as well. If you are booking all foreign VAT as “out of scope,” then VATBox’s AP audit service will help you find this lost source of revenue… maybe even enough to upgrade the office holiday party this year.

Documentation adherence: When filling out form VAT65A to reclaim VAT paid in the UK, make certain that the form is filled out in its entirety to avoid claim rejection simply due to technicalities. Ensure you include documentation that features the company address, a simple step that is especially relevant to US businesses. A company can claim as much VAT as necessary — there is no maximum amount — but the UK has set minimum refund amounts. VATBox can help clarify documentation requirements and ensure the submission is complete.

Verification of business status: Companies in the US, as well as other non-EU countries, must obtain Certificate of VAT registration in origin country to allow HMRC to verify their business status when claiming VAT incurred in the UK as per the 13th Directive. This is an official certificate proving that you are registered as a business in your own country. The certificate should be less than one year old and contain the applicant’s legal name, address and VAT ID (or TIN ID in case of US applicants) and describe the business activity of the applicant – all in English. Every 12 months, a new certificate is required to be included with your claim. If the certificate issued by the home country is not adequate – as is often the case in the US – the business must complete form VAT66A.

Efficiencies through technology: Advanced, automated VAT recovery systems seamlessly access standard data and scanned invoices from your ERP, TES and other internal systems. This is data that already exists – but often remains unexploited for the purpose of VAT recovery. These systems minutely examine data from expense reports and AP invoices. Automatically eliminating errors, duplications, disqualified evidence, and incomplete data – they find disparities between actual expenses and documented expenses, between real costs and considered costs. They also illuminate data leakage – the significant gaps between data and evidence. Then, automated VAT recovery systems validate and prepare, submit and manage foreign claims to the UK authorities.

Next steps: Easy VAT recovery with VATBox automation

While this process may seem complicated, VAT recovery is actually quite simple. Get started with these steps.

  1. Contact us to understand how we can help you automate the VAT and GST recovery process while maintaining full compliance for optimal returns and savings.
  2. Integrate your Travel Expense and/or ERP solution for a full VAT recovery potential analysis so we can start auditing your data.
  3. Designate VATBox as your agent on the form VAT65A to also have the formal refund process fully covered.
  4. Log into the VATBox portal to find all full VAT/ GST and compliance analysis, reveal industry benchmarks for your global data sets, and enjoy a full drill-down to every single invoice image.
  5. VATBox will submit all VAT refund claims to the HRMCon your behalf.

Act promptly and avoid missing the annual 31st December deadline for reclaiming UK VAT.

Let VATBox help you submit your VAT claim on time and reduce your VAT-related risks, and impact your company’s bottom line with greater compliance! Think of it as our Christmas gift to your organisation.

About the Author

Doron Shalem is the VP of VAT Expertise & Reclaims at VATBox, where he is responsible for knowledge management, quality control, and the claim submission process. He brings 13 years of relevant experience with IT and Risk Advisory as an Executive director at Ernst & Young. Doron is a licensed CPA and holds a BA in Accounting and Economics from Tel Aviv University.

[1] Eligibility rules vary per Member State and not all Member States may refund VAT (in full) on the expense types mentioned.