UK VAT Recovery Incurred on Business Activities by Overseas Businesses

Businesses outside the United Kingdom frequently incur VAT on goods and services when trading, attending events, or operating within the UK market. But many of these companies overlook the fact that this VAT is often recoverable—resulting in lost cash flow and unnecessary operating costs.

The UK VAT system allows overseas businesses to claim VAT recovery on specific expenses, provided certain conditions are met. These claims are handled by HMRC (His Majesty’s Revenue and Customs) under clearly defined procedures and deadlines. For businesses that qualify, VAT recovery can significantly reduce operational costs and improve profitability.

Understanding how to reclaim VAT in the UK isn’t just about saving money—it’s about compliance, timing, and making sure your internal systems are geared for audit-proof submissions. In this guide, we’ll break down everything you need to know: who qualifies, what expenses are eligible, how to apply, and how to avoid common mistakes.

Whether you’re an EU-based business using the 13th Directive or a non-EU business navigating the UK’s post-Brexit VAT recovery framework, this guide by The Taxcom will provide the practical and legal clarity you need to make successful claims.

Who Is Eligible for UK VAT Recovery?

Not every foreign business can reclaim UK VAT. The eligibility criteria depend on your country of establishment, the nature of your activities in the UK, and whether you are VAT-registered in the UK or elsewhere.

1. Businesses Outside the UK and Not VAT-Registered in the UK

Overseas businesses that are not established in the UK and do not have a UK VAT registration may still be eligible to recover UK VAT on specific expenses. This includes:

• Businesses from EU member states under the EU VAT refund procedure (as amended post-Brexit).

• Businesses from non-EU countries under the 13th Directive equivalent procedure, provided there is reciprocity—meaning the claimant’s home country offers similar VAT recovery to UK businesses.

2. Conditions for Eligibility

To claim VAT recovery, the overseas business must meet the following:

• No UK business establishment: The claimant must not have a fixed establishment, place of business, or other significant presence in the UK.

• Not supplying taxable goods/services in the UK: The business must not make any taxable supplies in the UK, other than:
  • Certain transport services

  • Services subject to reverse charge

• Incurred UK VAT on expenses related to business activities (e.g., attending trade fairs, purchasing goods for resale abroad).

3. Reciprocal Arrangements with Non-EU Countries

HMRC only accepts VAT recovery claims from non-EU countries that provide equivalent VAT refunds to UK businesses. Some countries are excluded from this list, meaning businesses based in those jurisdictions are not eligible to reclaim UK VAT.

Examples of countries with reciprocal agreements include:

• Norway

• Switzerland

• Canada

• Japan

Excluded countries may include:

• Brazil

• China

• India

Always check HMRC’s latest guidance for an up-to-date list of qualifying countries.

4. Representative or Agent

Overseas businesses do not need to appoint a fiscal representative to submit VAT recovery claims, but they may choose to appoint a UK-based VAT recovery agent for administrative support. Agents can help ensure that claims are filed correctly, with all required documentation.

What Expenses Are Eligible for VAT Recovery?

Not all business expenses qualify for VAT recovery. HMRC has strict rules about which types of input VAT can be reclaimed by overseas businesses. Ensuring your claim includes only eligible expenses is key to avoiding rejection or audit.

1. Commonly Eligible Expenses

The following categories of expenses often qualify for UK VAT recovery if they are strictly for business purposes:

• Hotel accommodation for employees attending meetings, trade fairs, or training

• Travel costs within the UK such as taxi fares, train tickets, and car hire

• Admission fees for exhibitions, conferences, and trade events

• Professional services like legal advice, consultancy, and accounting

• Marketing services purchased from UK suppliers

• Office supplies and business-related purchases made while in the UK

Each expense must be supported by a valid VAT invoice issued by a UK-registered supplier.

2. Non-Eligible or Restricted Expenses

Certain types of expenses are explicitly excluded from VAT recovery. These include:

• Entertainment costs such as meals, hospitality, and client entertainment

• Passenger vehicles used for both business and private purposes

• Goods and services used for non-business activities

• Expenses not supported by proper documentation

• Capital goods like property or machinery (generally non-recoverable under overseas claims)

If any portion of the expense is used for non-business purposes, VAT recovery may be denied or proportionally reduced.

3. Special Cases

Some expenses may fall into grey areas, where eligibility depends on the specific context. For example:

• Staff training: Eligible if business-related, but not if for internal UK employees.

• Subcontracted services: May be recoverable if the services are provided in the UK and taxed accordingly.

• Import VAT: Recoverable only if the overseas business meets certain conditions or has a UK VAT registration.

Each claim must be evaluated individually, with evidence to demonstrate the direct link to business activity.

4. Importance of Accurate Documentation

To claim VAT recovery successfully, the overseas business must retain and submit original VAT invoices or certified copies showing:

• Supplier’s UK VAT number

• Clear breakdown of VAT

• Business name of the overseas claimant

• Description of goods/services provided

Poor recordkeeping or submitting invoices with errors is one of the most common reasons for HMRC rejecting VAT recovery claims.

How to Apply for VAT Recovery: Process and Deadlines

The process for UK VAT recovery by overseas businesses depends on where the business is established. HMRC provides separate procedures for EU-based and non-EU-based claimants, each with specific rules, forms, and portals.

1. For EU-Based Businesses

Although the UK has left the EU, businesses established in an EU member state can still reclaim UK VAT under a modified version of the EU VAT Refund Directive (2008/9/EC).

• Application method: EU-based businesses must submit their claim electronically via their national tax authority’s portal, which will forward the claim to HMRC.

• Currency: All amounts must be expressed in GBP.

• Deadline: Claims must be submitted by 30 September of the following calendar year (e.g., VAT incurred in 2024 must be claimed by 30 September 2025).

• Minimum claim amounts:
  • £130 for quarterly claims

  • £16 for annual claims

2. For Non-EU Businesses (13th Directive Equivalent)

Non-EU businesses use a paper-based process under a UK equivalent of the 13th Directive.

• Application method: Submit a VAT65A form by post to HMRC, along with supporting documents.

• Supporting documents required:
  • Original VAT invoices

  • Proof of business activity (e.g., commercial registration documents)

  • A certificate of business status from your local tax authority (valid for 12 months)

• Submission address:
  • HM Revenue and Customs, VAT Overseas Repayment Unit, BX9 1GD, United Kingdom

• Deadline: Same as for EU businesses — 30 September of the following year

• Minimum claim amounts:
  • £130 for periods under a year

  • £16 if claiming for a full calendar year

3. Claim Periods and Frequencies

Overseas businesses can file claims:

• Quarterly, if the amount exceeds £130

• Annually, if claiming less than £130 but more than £16

HMRC generally allows only one claim per calendar year unless your claim exceeds the minimum threshold in a shorter period.

4. Timeframe for HMRC Response

HMRC aims to respond to complete applications within four to eight months, but this can be delayed if:

• Documentation is incomplete or incorrect

• There is a request for additional information

• The volume of claims is high

Businesses should retain all correspondence and monitor the progress closely. If HMRC makes a decision, they will either approve, partially approve, or reject the claim with an explanation.

Common Pitfalls and How to Avoid Rejections

Even when a business meets all the eligibility criteria, VAT recovery claims are often rejected or delayed due to preventable errors. Understanding the most frequent pitfalls can help overseas businesses avoid wasting time, money, and administrative resources.

1. Incomplete or Incorrect Documentation

One of the top reasons claims are denied is inadequate paperwork. This includes:

• Missing or incomplete VAT invoices

• Invoices not addressed to the claimant’s legal business name

• Absence of the supplier’s UK VAT number

• Lack of a certificate of business status (for non-EU applicants)

How to avoid:
Create a robust documentation checklist. Every claim should be supported by original invoices, proper identification, and consistent legal naming.

2. Submitting After the Deadline

Late applications are automatically rejected. The 30 September deadline following the claim year is absolute—there are no extensions or appeals for lateness.

How to avoid:
Set internal alerts and start preparing claims well before the deadline. Don’t wait until Q3 of the following year to gather documents.

3. Claiming Ineligible Expenses

Some overseas businesses try to reclaim VAT on:

• Entertainment

• Meals

• Vehicles

• Non-business-related costs

HMRC reviews claims carefully, and any attempt to claim for restricted categories can cast doubt on the entire application.

How to avoid:
Only claim VAT on expenses clearly linked to business activity and permitted under HMRC rules.

4. Claiming When VAT Shouldn’t Have Been Charged

If a UK supplier should have applied the reverse charge mechanism or zero-rated the invoice, then VAT was incorrectly charged in the first place—and HMRC will not refund it.

How to avoid:
Train staff to verify UK suppliers are charging VAT correctly. If there’s a mistake, the supplier should issue a corrected invoice—not HMRC.

5. Errors in Currency or Calculations

All claims must be in pounds sterling (GBP), and miscalculations due to currency conversion errors are a red flag.

How to avoid:
Use official exchange rates from HMRC or reliable financial sources at the time of transaction. Double-check the math.

6. Failing to Prove Business Activity

HMRC requires proof that the overseas claimant is a legitimate business, not just an individual or shell entity.

How to avoid:
Include up-to-date business registration certificates and a statement of business activity in the claim file.

7. Not Responding to HMRC Enquiries

If HMRC requests additional information and the claimant does not reply within the specified time frame, the claim will be closed or rejected.

How to avoid:
Assign a point of contact responsible for monitoring communications from HMRC during the review period. Respond promptly and comprehensively.

Tips for Maximising UK VAT Recovery Success

Recovering VAT is not just about meeting minimum requirements—it’s about proactive planning, accurate recordkeeping, and strategic claim preparation. Here are best practices to maximise your chances of a successful UK VAT recovery claim.

1. Centralise VAT Documentation Early

A decentralised approach—where each department or local team handles invoices—leads to missing or inconsistent documentation. Instead:

• Centralise all VAT-relevant documentation in a shared repository

• Use a uniform naming convention for invoices and receipts

• Keep copies of certificates and HMRC correspondence in a secure, backed-up system

This ensures you can assemble your claim quickly and completely.

2. Use a Professional VAT Recovery Agent

While not mandatory, using a specialised UK VAT recovery agent can significantly improve claim quality. Agents:

• Know what HMRC looks for in successful claims

• Can pre-screen documentation

• Manage deadlines and submissions

• Communicate directly with HMRC on your behalf

A reputable agent also reduces the risk of rejection from avoidable technical errors.

3. Train Staff on VAT-Compliant Purchases

Ensure your teams understand what purchases qualify and how to request VAT-compliant invoices from UK suppliers. Key tips:

• Always request that the supplier includes your legal business name and address

• Ensure the invoice itemises VAT clearly

• Educate staff on ineligible categories like hospitality and personal travel

Internal training reduces future claim errors and lost reclaimable VAT.

4. Audit Past Expenses

If your business has been active in the UK over the past year but hasn’t submitted a claim, it’s worth conducting a retrospective audit. You can:

• Recover overlooked expenses within the allowable period (generally the previous calendar year)

• Identify patterns of missed VAT recovery

• Improve future processes based on historic gaps

5. Create an Annual Claim Calendar

VAT recovery is a recurring opportunity. Build it into your annual compliance calendar with milestones such as:

• Invoice review period: January–April

• Document verification: May–June

• Final submission prep: July–August

• HMRC deadline: 30 September

Routine structure reduces last-minute stress and increases claim success.

6. Keep HMRC Guidance Up to Date

HMRC periodically updates rules, processes, and accepted practices for VAT recovery. To stay compliant:

• Subscribe to HMRC bulletins or RSS feeds

• Bookmark the official Overseas VAT refund page

• Review guidance at least once per year

Being proactive prevents unintentional non-compliance due to outdated procedures.

Post-Brexit Changes and Their Impact on VAT Recovery

The United Kingdom’s departure from the European Union introduced major changes across customs, tax, and business regulation. One significant area affected is VAT recovery for overseas businesses. Understanding the post-Brexit environment is essential for ensuring compliant and successful claims.

1. End of the EU VAT Refund Portal for UK Claims

Before Brexit, EU-based businesses could use a single digital portal through their home country’s tax authority to submit VAT refund claims across all EU member states, including the UK.

After 1 January 2021:

• UK is no longer part of the EU refund system

• EU businesses can no longer use the EU VAT refund portal for UK claims

• Instead, they must follow the UK’s 13th Directive-equivalent procedure, similar to non-EU claimants

This means increased administrative burden for EU companies, with paper-based applications and stricter documentation requirements.

2. Certificates of Business Status Now Required from EU Claimants

Previously, EU businesses didn’t need to provide a certificate of business status from their national tax authorities when claiming VAT from the UK.

Post-Brexit, HMRC now requires a valid certificate from both EU and non-EU claimants. It must:

• Be issued by the tax authority in the claimant’s home country

• Confirm that the business is established and taxable

• Be dated within 12 months of the claim

• Be original, not a copy or scan

Failure to include this certificate is a common reason for rejection since Brexit.

3. Reciprocity Rules Re-Evaluated

The UK has revisited its reciprocity agreements with non-EU countries post-Brexit. This has resulted in:

• Some previously eligible countries losing access

• Others being granted or reinstated eligibility based on updated arrangements

Businesses must check HMRC’s latest list to ensure their country remains eligible for VAT recovery.

4. Delays and Transition-Related Bottlenecks

The initial transition period after Brexit caused delays in claim processing, especially in 2021 and 2022. Some common issues included:

• Confusion about application routes

• Lost or misdirected paper claims

• Delayed communication between EU tax authorities and HMRC

While systems have stabilised, businesses must continue to factor in longer turnaround times and maintain a buffer in financial planning.

5. Increased Scrutiny from HMRC

Brexit brought a renewed focus on compliance and enforcement. HMRC has intensified:

• Review of documentation

• Validation of business status

• Scrutiny of VAT invoices and supplier details

Overseas businesses must be fully prepared for additional queries and respond promptly to avoid losing refund opportunities.

Frequently Asked Questions 

1. What is VAT recovery, and why is it important for overseas businesses?

VAT recovery is the process by which a business reclaims Value Added Tax (VAT) paid on eligible expenses. For overseas businesses, UK VAT recovery is essential because it allows the company to reduce operational costs, improve cash flow, and avoid double taxation when doing business in the UK.

2. Can my business claim UK VAT recovery if we are not registered for VAT in the UK?

Yes. One of the core principles of VAT recovery for overseas businesses is that you do not need to be VAT-registered in the UK to make a claim. However, you must meet specific criteria—primarily, that you are not making taxable supplies in the UK and are not established in the UK.

3. What documents are required for a UK VAT recovery claim?

To ensure your VAT recovery claim is accepted by HMRC, you must submit:

• Original VAT invoices showing the UK supplier’s VAT number

• A completed VAT refund form (e.g. VAT65A for non-EU businesses)

• Proof of business activity (such as a business registration certificate)

• A certificate of status from your local tax authority (valid for 12 months)

Proper documentation is critical for a successful VAT recovery application.

4. Is VAT recovery available on all business expenses?

No. VAT recovery only applies to eligible business-related expenses. Ineligible categories include:

• Entertainment costs

• Passenger vehicles

• Goods used for non-business purposes

Only clearly documented and business-related expenses qualify for VAT recovery under HMRC rules.

5. What is the deadline for submitting a VAT recovery claim in the UK?

The deadline for VAT recovery claims is 30 September of the calendar year following the year in which the VAT was incurred. For example, VAT paid in 2024 must be claimed by 30 September 2025. HMRC does not allow extensions for late filings.

6. Can we recover import VAT?

In certain cases, yes. Import VAT may be eligible for VAT recovery if:

• You have proof of payment (e.g. C79 certificate)

• The goods were imported for business purposes

• You are not VAT-registered in the UK

That said, import VAT recovery is more complex and often requires assistance from a VAT agent or customs broker.

7. What is the processing time for a UK VAT recovery claim?

HMRC typically processes VAT recovery claims within four to eight months from the date of submission, assuming the application is complete and correct. Delays are common if HMRC requests additional documentation or clarification.

8. Do I need a UK representative to submit a VAT recovery claim?

You are not required to appoint a UK fiscal representative. However, many businesses choose to use a UK VAT recovery agent to handle the administrative work, improve claim accuracy, and deal directly with HMRC.

9. Can I submit multiple VAT recovery claims in one year?

Yes, but there are conditions. Overseas businesses can submit:

• Quarterly claims, if the amount exceeds £130

• Annual claims, for amounts over £16

Typically, only one VAT recovery claim per calendar year is submitted unless claims exceed the minimum threshold within a shorter period.

10. What happens if HMRC rejects my VAT recovery claim?

If your VAT recovery claim is rejected, HMRC will send a notice explaining the reason. Common causes include:

• Ineligible expenses

• Incomplete documentation

• Late submission

You may be able to resubmit or appeal depending on the grounds for rejection. This is why careful preparation and professional review are crucial.

11. Are VAT recovery rules the same across all countries?

No. Each country has its own VAT recovery framework. The UK’s rules are specific and differ from EU member states, especially post-Brexit. Always check HMRC guidance or consult a tax advisor familiar with cross-border VAT recovery.

12. Can UK suppliers issue zero-rated invoices instead of charging VAT?

In some cases, yes. If the supply is deemed outside the scope of UK VAT or subject to the reverse charge mechanism, UK suppliers should not charge VAT. If VAT is incorrectly charged, it cannot be recovered from HMRC—only the supplier can correct the invoice.

This is why understanding the correct VAT treatment upfront is just as important as VAT recovery itself.

13. What is the correct way to check the VAT number?

To check VAT number, the correct method is to use HMRC’s official VAT number checker available at gov.uk. This tool allows you to enter the VAT number and confirms whether it’s valid, along with displaying the registered business name and address if available

14. How can I check if my country has a reciprocal VAT recovery agreement with the UK?

HMRC publishes an updated list of countries that have reciprocal VAT recovery arrangements. If your country is not on this list, your business cannot claim VAT recovery in the UK. You can find the list on the HMRC website or through official government tax bulletins.

Ready to Reclaim Your UK VAT?

At The Taxcom, we help overseas businesses navigate the UK VAT recovery process with precision, speed, and full compliance. Our team:

Whether you’re an EU supplier, a US-based tech firm, or a Japanese exporter attending UK trade shows, your business could be leaving money on the table without a structured approach to UK VAT recovery.

Let’s turn your UK VAT costs into cash refunds.

Contact us today