How will Brexit impact 2020 VAT Reclaim?
The Brexit transition period ended on 31st December 2020. This is having a big impact across all areas of business, including 2020 VAT reclaim. Businesses affected include UK companies recovering non-UK (foreign) VAT after Brexit, as well as non-UK companies recovering UK VAT.
However, UK companies can still recover 2020 VAT incurred in the EU via electronic submission of claims (under the Directive 2008/09/EC) but not for long. The same applies for EU based companies recovering 2020 VAT incurred in the UK.
2020 VAT reclaim on expenses incurred in the UK and the EU
The electronic portals will remain open until 11pm on 31st March 2021 and will allow the submission of the following claims:
- Jan – Dec 2020 VAT reclaim for VAT charged in the UK claimed by EU businesses;
- Jan – Dec 2020 VAT reclaim for EU companies claiming VAT from the UK.
After 31st March 2021, it will no longer be possible for UK businesses to reclaim (cross-border vat reclaim) EU VAT under the 8th Directive and no longer possible for EU businesses to reclaim (cross-border) UK VAT under this Directive.
How to reclaim VAT incurred after 1st Jan 2021
UK companies reclaiming EU VAT
2021 VAT refund claims may be filed after 1 Apr 2021 under the so called 13th directive. This will mean that original hard copy invoices will be required at submission stage as well as certificate of taxable status from the UK businesses claiming VAT.
- Local fiscal representative must be appointed in some countries – i.e. France, Spain
- Preliminary arrangements may need to be made to ensure VAT is reclaimable before incurring expenses – i.e. Italy
- Restrictions of eligible expenses that apply to nonEU companies may apply:
- Germany – no refund of VAT on fuel
- Czech Republic – no refund on most travel related expenses
- Spain – no refund of VAT unless on trade fair related expenses or tools used to make goods for export (unless official reciprocity agreement concluded)
- Reciprocity restrictions: some EU Member States will only refund VAT to countries with officially recognized reciprocity : i.e. Poland, Romania, Hungary – further development expected regarding recognizing reciprocity with the United Kingdom.
EU companies reclaiming VAT from the UK
Claims for periods starting from 1st Jan 2021 will be under the Foreign VAT Reclaim procedure which so far applied to non-EU businesses reclaiming VAT from the United Kingdom.
- Documents needed to complete a claim include:
- claim form VAT65A, Certificate of status (original hard copy or electronic certificate which can be validated by HMRC);
- originals of invoices/import documents (“You must provide the originals of all invoices and import documents with your application. Copies are not acceptable.”
Northern Ireland / EU companies reclaiming VAT on goods:
2021 VAT refund claims of qualifying businesses (EU or identified as trading under the Northern Ireland Protocol) on qualifying purchases (goods only) continue to be filed under the EU VAT refund directive (known as the 8th Directive) procedure – electronic submissions with deadline to file: 30 September of the following calendar year.
Click here for a detailed summarisation on how Brexit will impact VAT compliance.
What is next for VAT and Brexit?
Although there are still a lot of uncertainties around UK leaving the EU, one thing is certain: 2020 VAT Reclaim on cross-border expenses incurred between the UK and the EU must be claimed no later than 31st March 2021.
Some of the EU Tax Authorities already announced that 2020 cross-border VAT refund applications from UK businesses will not be accepted after 31st March 2021, not even under the procedural rules for third countries.
In light of the present facts, we would advise you to review your business expenses (both Accounts Payable and Travel and Expense) with cross-border VAT charged for tax year 2020 and get started with Taxback International as soon as possible, ideally by mid-January 2021.