Just as most of us are sliding back into our usual work routines, it’s time to return to VAT. For many it may come as a surprise but there is a new VAT deadline looming. This time though it’s European VAT. Many companies and entrepreneurs trade with other European countries and the 30th of September is the deadline to reclaim VAT paid in other EU countries. Conversely, do you have VAT to be reclaimed for 2015, which was invoiced to you by VAT registered companies or entrepreneurs in other EU member states? If the answer is yes then make sure you file your reclaim request by the 30th of September 2016. In virtually all EU member states, late filing can lead to the rejection of the claim.
Making a claim
Making a claim is not as difficult as you may think. Everything can be done online. Applications for refunds of VAT incurred in other EU countries by businesses registered for VAT in the UK or the Isle of Man should be submitted to HMRC by the business (or an appointed agent) through the VAT Online Services facility. A separate application should be submitted to HMRC for each country from which a VAT refund is being claimed. HMRC carries out an automated verification to check that the applicant is registered for VAT in the UK before forwarding each claim to the relevant EU country.
Using the right system
Before rushing to meet this deadline, it is important to raise awareness of potential problems. Two of the most common issues are attempting to recover foreign VAT on a client’s UK VAT return and submitting a EU VAT refund application too late.
The place of supply rules may result in a client not being eligible to use the EU VAT refund system because the client is liable or eligible to be registered for VAT in the EU country from which they are seeking to recover the VAT. Guidance regarding the place of supply rules is included in VAT Notice 741A and VAT Notice 725. Make sure that you understand these rules before submitting any applications.
Preparing for the future
Did you know that by 2020 HMRC wants all taxpayers and businesses in the UK to keep track of their tax matters digitally and update HMRC at least each quarter via a digital tax account? This is one more reason to take a leap of faith and enter the cloud-based world of digital accounting. Sage One offers a number of solutions to suit every company and entrepreneur. For example, Sage One Start and Sage One Accounting deal with VAT calculations and submitting VAT returns to HMRC automatically. Sage One Accounting can also produce VAT invoices automatically. A quick guide to VAT is available here.