Since 2010 UK business have been able to use an electronic service operated by HMRC to claim refunds of VAT incurred in other EU member states. This process is accessed through the government gateway as part of the old VAT online service, and this is causing problems for businesses which have filed VAT returns under MTD.
When you log into the EU VAT claim system it may request that you enter the amount of VAT paid on the last VAT return as the answer to a security question. However, if you enter the VAT reported on the last VAT return submitted under MTD, this answer will be rejected. You need to enter the VAT liability as reported on the last VAT return submitted through the government gateway old online portal.
HMRC is aware of this problem and may fix it before the deadline for submitting refund claims for VAT incurred within 2018, which is 30 September 2019.
If the UK leaves the EU on 31 October 2019 without a reciprocal arrangement in place for VAT refunds, HMRC’s access to the digital portal for claiming refunds from EU member states will close. UK businesses will have until 5pm on 31 October 2019 to use that digital portal to claim any refunds for VAT incurred in 2019 up to that date.
After that point UK businesses will have to use the paper-based system available to non-EU businesses. Each refund claim will have to be made directly to the tax authority of the country where the VAT was incurred, and it may have to be submitted in the language of that country. There is likely to be a delay in obtaining refunds.
Written by the Tax Advice Network