When a business incurs VAT on business expenses in other EU countries, they must not attempt to reclaim VAT on their UK VAT return. However, if the business meets certain conditions it can reclaim Vat from overseas transactions through HMRC’s VAT online services system.
Those conditions for the UK business are:
- it must be VAT registered in the UK
- it must not be registered for VAT (or liable to be registered) in the country where the expenses were incurred
- it must not have a place of business, fixed establishment or other residence in that other EU country
- it does not make supplies of goods or services in that EU country, except for transport services, or services where the recipient pays the VAT
The claim must be made for complete quarters or for the whole calendar year. It is easier to claim for a full year when the minimum VAT to be reclaimed is set at €50, where as a quarterly claim must be for at least €400 of VAT. These thresholds can vary in different countries. The deadline for submitting a claim for VAT incurred in 2016 is 30 September 2017; claims made after that date will not be accepted.
The business can’t reclaim VAT on goods acquired for resale, or on goods brought into the UK from another EU country. The claim must be made in the national currency of the country to which the claim is directed. The supporting invoices must be retained, but those documents don’t need to be sent with the claim; they may be requested later.
Different EU countries operate different rules on blocking refunds of VAT for particular categories of expenses, such as for business entertaining in the UK. Many EU countries block VAT claims on road fuel and accommodation expenses, so you need to research the VAT rules for the country where the expense was incurred.