General EU businesses (8th Directive)
U.K. VAT is known as “Value Added Tax” (VAT).
Goods and services supplied to or from the Isle of Man are regarded as having been supplied within the U.K. The Channel Islands are not part of the U.K. or the EU for VAT purposes.
A foreign taxable person is entitled to recover U.K. VAT if the following conditions are satisfied:
- The business is not registered or liable to be registered for VAT in the U.K.;
- The business does not have residence, it seat or a fixed establishment in the U.K.;
- If no such establishment exists, the person is not ordinarily resident or domiciled in the UK;
- The business has not carried out any taxable supplies in the U.K., except for:
- Certain transportation and ancillary services carried out in connection with the international carriage of goods from/to non-EU countries; or
- Services where the VAT on the supply is payable solely by the person to whom they are supplied.
VAT cannot be recovered on:
- Non-business supplies (if a supply covers both business and non-business use, VAT can be reclaimed on the business element of the supply);
- Supplies the claimant intends to use for carrying on an economic activity in the U.K. or that the claimant intends to export from the U.K. (i.e. economic activities, the place of supply of which is the U.K.);
- Business entertainment and hospitality expenses and other expenses on which the recovery of VAT is restricted in the U.K.;
- Goods and services purchased for resale (e.g. as part of package holiday) and that are for the direct benefit of travellers;
- VAT that has been incorrectly invoiced or where VAT has been charged on the dispatch of goods to another member state, or the export of goods outside the EU (this must be taken up with the supplier);
- The purchase or import of passenger motor vehicles, unless used wholly for business purposes; and
- Certain second-hand goods, such as antiques, for which a tax invoice will not be issued.
The goods or services on which VAT is being claimed must be for the purpose of carrying out economic activities in a country other than the U.K. and that would create the right to a VAT deduction in that country.
Where the supply of goods or services are used by the claimant for making exempt supplies without full recovery of VAT on related costs, it is first necessary to identify the proportion of VAT that would have been recoverable by the person in its country of establishment on such supplies.
The recoverable amount is then calculated by reference to the proportion of the VAT that would be recoverable in the U.K. by the person where he acquired the goods and services in the course of carrying on the business in the U.K. (i.e. by applying the rules set out above) Not more than 50% of VAT can be recovered on the lease of passenger motor vehicles not used solely for business purposes.
The period covered by the application is known as the “refund period.” This must not be more than one calendar year or less than three calendar months (unless it covers the remainder of a calendar year for which claims already have been submitted covering more than nine months).
If the application relates to a period of less than one calendar year but not less than three months, the amount for which application is made may not be less than GBP 295; if the application relates to a period of a calendar year or the remainder of a calendar year, the amount may not be less than GBP 35.
Properly completed applications must be submitted to the member state of establishment at the latest on 30 September of the calendar year following the refund year. If a company deregisters for VAT during the refund year, it must submit an application as soon as possible following deregistration.
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