VAT Recovery in the United Kingdom

Successful VAT recovery heavily depends on your ability to understand the niche tax laws in the country you’re reclaiming from. Fortunately, we at VAT IT are experts in global VAT legislation and have processes in place to help you navigate country-specific VAT processes worldwide. This week’s spotlight? The United Kingdom. Here’s your pocket guide to recovering VAT in the United Kingdom like a pro. 

First things first, what can you actually reclaim? 

Foreign VAT reclaim in the United Kingdom

If you're registered for business purposes in a country outside of the UK, as per UK VAT guidelines, you may still be eligible for VAT refunds on business expenses accrued within the UK. However, successfully reclaiming these expenses hinges on navigating the eligibility requirements, VAT rates, claiming periods, and eligible expenses. 

In the United Kingdom, common eligible expenses on which VAT can be recovered for overseas business claimants include entertainment expenses, travel-related costs, fuel, and conference and event spending. But before we dive into vast reclaim opportunities for overseas business claimants, it’s important to understand who can apply for the reclaim scheme specifically reserved for non-resident businesses in the UK. Here’s a look. 

Who can apply for VAT reclaim in the UK?

The most imperative rule when confirming eligibility for VAT reclaim in the UK is to remember that the foreign reclaim opportunity is exclusive to businesses that are VAT-registered in a country outside of the United Kingdom. In addition, businesses must meet the following criteria: 

• The business must not be registered, liable, or reliable to be registered for VAT in the UK. 
• The business cannot have a place of business or other residence inside the UK, nor can they make any taxable supplies in the UK.

It is also a condition of the scheme that your own country allows similar concessions to UK traders in respect of its own turnover taxes. Your application will only be refused on these grounds if your own country has a scheme for refunding these taxes but refuses to allow UK traders to use it.

This criterion makes it possible for non-resident businesses to recover VAT incurred on business expenses without necessarily needing to register or make sales in the UK. 

The reclaim opportunity in the UK

The standard VAT rate in the UK is 20% and is charged on most goods and services. This means non-resident businesses will inevitably incur VAT on goods and services, but  they are rightfully eligible to reclaim some of the VAT incurred. Examples of common expenses generally taxed at the 20% VAT rate include hotels and accommodation, restaurants, fuel, and car rental. However, even these business expenses merely scratch the surface when it comes to the wide scope of niche expenses that specific businesses within an industry can claim - but we’ll keep those a secret a little longer. 

Naturally, it’s worth questioning that if there is such a large reclaim opportunity, why are so many savings opportunities slipping through the cracks? In brief, most businesses find it challenging to administer and maximize their VAT potential-  either due to a lack of knowledge on the specific VAT processes in the country where they incurred VAT or due to suboptimal administrative processes that are difficult to manage. Fortunately, although these challenges exist - so do we. 

We're tapped into every corner of the VAT landscape, helping non-resident businesses recover the VAT portion on international business expenses while streamlining admin, maximizing their yield, and staying 100% compliant. 

Ready to learn more about how we can help you recover VAT in the UK? Download our guide here: https://vatit.com/project/united-kingdom/