Getting VAT back on overseas expenses
Updated July 2008
This alert will be of interest if you sell or buy services or goods in an overseas market.
In many situations if you are a UK based supplier (i.e. the company providing services to say EU customers, but delivering the services in the UK), you could take on the task of obtaining UK VAT refunds for those customers. This may offer you a competitive advantage?
Your business can only reclaim input tax on its VAT return if the expenditure was incurred in the country in which it is VAT registered. For example, a UK company can only reclaim input tax on expenditure relevant to other UK businesses. Overseas VAT is reclaimed as follows:
• countries within the EC – VAT can be reclaimed by submitting a claim to the country in which the expenditure was incurred – this is known as an 8th Directive claim
• countries outside the EC – many non-EC countries have their own system of indirect taxes e.g. Australia has a tax called GST (Goods and Services Taxes). In many cases, a reciprocal arrangement will be in place with the UK (Australia included) whereby claims can be made between the two countries in exactly the same way as 8th Directive claims. This procedure is known as a 13th Directive claim.
For example if your UK business incurred GST on a business trip to Australia (not a trip to watch an Ashes cricket series!) you could submit a claim to the Australian authorities to recover this tax. Equally, an Australian business registered for GST could submit a claim to the UK to recover any relevant VAT paid in the UK.
If you do trade overseas and would like to discuss any of these issues in more detail please call.