Business trips abroad

When out on a weekend shopping trip most people tend not to think about VAT when they buy something. They’re right not to dwell on it when you consider that one sixth of the price goes straight to HMRC. At least when you make a purchase for your business you can usually reclaim the VAT. But interestingly our straw poll of businesses showed that most aren’t aware they can reclaim VAT incurred while on a foreign trip.

Travel expenses and more

Where you or one of your employees makes a business purchase when abroad, the price might well include an amount equivalent to VAT. In some countries, particularly in the EU, the VAT rate is even higher than in the UK. In Portugal you’ll pay 23% and in Denmark 25%. So when paying locally for a hotel, a meal or buying goods it’s important to ask for a proper receipt for your VAT and other tax records.

Getting EU VAT back

Until January 2010 reclaiming VAT on foreign purchases was a nightmare. Forexample, it wasn’t unusual to wait three years before getting your money back from the Italian tax authorities. However, there is now a more user friendly way to do it.

Centralised system

All claims and the corresponding purchase invoices can be sent to HMRC electronically. It then handles the process of getting the VAT back from the relevant EU tax authority.

Scheme key points

Before scrabbling around in your suitcase for the bunch of Barcelona taxi receipts there are a few scheme basics to be aware of:

  • your claim must cover three months or more and be for a minimum of €400 (£295)for periods of less than a year; or
  • if your claim covers a whole calendar year, or the rest of a year where you’ve already made a claim for part of it, it must be for at least €50 (£36)
  • your claim must categorise purchases into one of ten types (see The next step )
  • the EU tax authority has four months to process your claim, and an additional ten days to repay it. If it doesn’t meet this deadline, it must pay you interest
  • make a claim by logging on to HMRC’s VAT service, click “add services” and from the list that appears choose VAT EU Refunds” (see The next step ).

Travels outside the EU

In some cases you can reclaim VAT paid on business purchases made in non-EU countries. The bad news is that there’s no centralised system to handle claims. They must be made to the tax authority in the country in which the VAT was paid. Tip. Call HMRC’s VAT helpline (0300 200 3700) for a list of countries that accept claims from UK businesses for refunds of local VAT, plus the details of where to send your claim.

Reproduced with the permission of Indicator – FL Memo Limited. For subscription information call 01233 653500