Series 22 Back to Brexit Basics – EU VAT refund system for UK businesses if no deal

Feb 25, 2019

Last week, we looked at the simplified customs procedures the HMRC propose to introduce in the event of a no-deal Brexit.  This week we look at the changes that are proposed for claiming back EU VAT suffered by UK businesses in the event of a no-deal Brexit.

If the UK leaves the EU without an agreement, then UK businesses will continue to be able to claim refunds of VAT from EU member states but in future they will need to use the existing processes for non-EU businesses.  This will mean a change in practice for businesses.

As the UK will no longer be an EU Member State, UK business will no longer have access to the EU VAT refund system.

According to recently released HMRC guidance, and in letters sent to impacted businesses, after 29 March 2019, UK businesses that suffer VAT in an EU country must claim VAT refunds from that EU member state by using the relevant member state’s existing process for businesses based outside the EU.  This includes outstanding claims that relate to 2018 expenses, and claims relating to 2019.  Read further guidance from HMRC.

This process varies across the EU and UK businesses will need to make themselves aware of the processes in the individual countries where they incur costs and want to claim a refund. The general practice is that a claim is made directly to the EU country where the VAT arose.  

VAT incurred in Ireland

For example in Ireland, foreign traders established outside the EU (which will include UK businesses after Brexit) paying Irish VAT can claim back VAT from the Revenue Commissioners.  Revenue’s guidance on this process can be found here and there are strict conditions that need to be adhered to in order to reclaim VAT and not all VAT on expenditure can be reclaimed.

The EU has also provided information on claiming back VAT incurred in Ireland and details can be found on the European Commission’s website.

Readers can also find further general information about claiming VAT refunds from other EU member states on the EU Commission’s website.

The above guidance is relevant in the event of a no-deal Brexit. We will keep members updated on developments in this area.

Read all our Brexit updates on our Brexit web centre.