Tag Archives: 13th-directive-claim

Claiming VAT from the EU after Brexit

By   1 October 2019
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More work, confusion and administration for VAT after Brexit. 

After a No-Deal Brexit it will not be possible to recover input tax incurred in other EU Member States by using HMRC’s online service. This is known as; the electronic cross-border refund system which enables a business that incurs VAT on expenditure in a Member State where it is not established and makes no supplies, to recover that VAT directly from that Member State (the Member State of refund).

HMRC state that this will be the case after 5pm on 31 October 2019, but we shall have to wait and see on the precise timing.

HMRC has published meagre guidance on the new method of recovering overseas VAT (for some of us at a certain age, it is the “old” EC 8th Directive method).

Claiming a refund after Brexit

Unhelpfully, each EU Member State has its own process for refunding VAT to businesses based outside the EU (as UK businesses will be post Brexit). This is similar to the existing EC 13th Directive claims. A UK Business will need to use the process for the EU country where it is claiming a refund; even for unclaimed expenses incurred before Brexit.

A business will have to wade through the requirements and the EC provides assistance here.

This will be a complete headache for claimants and underlines the benefits of a harmonised system. Each claim form is different in each Member State, each form must be completed in the language of the country in which VAT is being claimed, and these forms are very bureaucratic; some run to over ten pages…. It will also be necessary to obtain and provide a Certificate of Status (CoS).

In summary

CoS

HMRC can issue a form VAT66A which may be used by claimants to prove that they are engaged in business activities at the time of the claim. A CoS is only valid for twelve months. Once it has expired you will need to submit a new CoS.

EC 13th Directive claim

A non-EU based business may make a claim for recovery of VAT incurred in the EU. Typically, these are costs such as; employee travel and subsistence, service charges, exhibition costs, imports of goods, training, purchases of goods in the UK, and clinical trials etc.

The scheme is available for any businesses that are not VAT registered anywhere in the EU, have no place of business or other residence in the EU and do not make any supplies there.

The usual rules that apply to UK business claiming input tax also apply to 13th Directive claims. Consequently, the likes of; business entertainment, car purchase, non-business use and supplies used for exempt activities are usually barred.

Process

The business must obtain a CoS to accompany a claim. The application form is a VAT65A and is available here  Original invoices which show the VAT charged must be submitted with the claim form and business certificate. Applications without a certificate, or certificates and claim forms received after the relevant deadline are not accepted. It is possible for a business to appoint an agent to register to enable them to make refund applications on behalf of that business.

Changes to recovery of VAT on imports

By   15 April 2019
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HMRC have recently issued RCB 2 (2019) which sets out HMRC’s view on Toll Manufacturers (TM). TM is an arrangement in which a company which has a specialised equipment processes raw materials or semi-finished goods for another company. It may also be called toll processing. Typically, a TM will import, say, pharmaceutical goods, process and distribute them within the UK for clinical trials on behalf of an overseas owner.

HMRC has become aware that a number of UK TMs have paid import VAT on behalf of overseas customers have also claimed a corresponding deduction for input tax under VAT Act 1994 Section 24. However, there is no provision in UK law for such deduction.

Current treatment

TMs will usually act as importer and recover import VAT via a C79 despite them not being the owner of the goods (the owner instructs the TM to carry out works on their goods on their behalf).

HMRC has now confirmed that this VAT treatment is incorrect, and it will no longer be permitted.

New treatment

Only the owner of the goods will be treated as the importer and be able to recover import VAT. TMs will no longer be able to claim this VAT.

However, HMRC will not require TMs to make adjustments to past claims and the treatment will only be required going forward.

Introduction

The change comes into effect from 15 July 2019

Affect

Affected TMs are likely to need to make significant changes to their systems before that date.

Overseas owners of the relevant goods will either need to:

  • register for UK VAT and claim the import VAT on a “regular” return, or
  • make a claim via the Thirteenth VAT Directive (86/560/EEC)

NB: In cases where title has passed before import into the UK (businesses sell on the goods before importing them into the UK so ownership and title has passed to the new owner, however the business that sold the goods acts as importer on UK import declarations, pays the import VAT to HMRC and receives the import VAT certificate – C79) the correct procedure is for the new owner of the goods to be the importer of record and reclaim the import VAT and not the previous owner.

As with many areas of VAT, a No-Deal Brexit is likely to increase the complications for such cross-border transactions in the future.

Please contact us if you have any queries or require assistance on this matter.

VAT: Changes to EU 13th Directive claims

By   17 December 2018
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HMRC has announced procedural changes to overseas businesses reclaiming VAT incurred in the UK RCB 12 (2018)

The main changes are in relation to HMRC’s firmer stance on what constitutes an acceptable Certificate Of Status (CoS).

CoS

HMRC issues form VAT66A which can be used by overseas claimants to prove that they are engaged in business activities at the time of the claim.

The CoS must be the original and contain the:

  • name, address and official stamp of the authorising body
  • claimants name and address
  • nature of the claimant’s business
  • claimant’s business registration number

The CoS is only valid for twelve months. Once it has expired you will need to submit a new CoS.

What is a 13th Directive claim?

A non-EU based business may make a claim for recovery of VAT incurred in the UK. Typically, these are costs such as; employee travel and subsistence, service charges, exhibition costs, imports of goods, training, purchases of goods in the UK, and clinical trials etc.

Who can claim?

The scheme is available for any businesses that are not VAT registered anywhere in the EU, have no place of business or other residence in the EU and do not make any supplies in the UK.

What cannot be claimed?

The usual rules that apply to UK business claiming input tax also apply to 13th Directive claims. Consequently, the likes of; business entertainment, car purchase, non-business use and supplies used for exempt activities are usually barred.

Process

The business must obtain a CoS from its local tax or government department to accompany a claim. The application form is a VAT65A and is available here  Original invoices which show the VAT charged must be submitted with the claim form and business certificate. Applications without a certificate, or certificates and claim forms received after the deadline are not accepted by HMRC. It is possible for a business to appoint an agent to register to enable them to make refund applications on behalf of that business.

Deadline

Claim periods run annually up to 30 June and must be submitted by 31 December of the same year. Consequently, any UK VAT incurred in the twelve months to 30 June 2018 must be submitted by 31 December 2018. With the usual Christmas rush and distractions, it may be easy to overlook this deadline and some claims may be significant. Unfortunately, this is not a rapid process and even if claims are accurate and the supporting documents are in all in order the claim often takes some time to be repaid. Although the deadline is the end of the year HMRC say that it will allow an additional three months for submission of a CoS.

Note

There is a similar scheme for businesses incurring VAT in the UK which are based in other EU Member States. However, the process and deadlines are different. Additionally, if you are a UK business incurring VAT (or its equivalent) overseas, there are mechanisms for its recovery. Please contact us if you would like further information.