UK businesses that are VAT registered regularly incur VAT in EU member states when purchasing goods and services abroad. This commonly arises through travel, exhibitions or local operational costs where suppliers charge VAT under the rules of the country in which the supply takes place.

This VAT is not recoverable through a UK VAT return submitted to HMRC. Instead, businesses must use the EU VAT refund system, which operates separately from the UK regime and is governed by the 13th Directive for non-EU businesses. This process involves submitting claims directly to the relevant EU tax authority, each of which applies its own rules, deadlines and evidential requirements.

Failure to recover EU VAT where permitted can result in unnecessary and often material cost to the business. Conversely, submitting incorrect or unsupported claims through the EU VAT refund system can lead to delays, partial rejections, or full refusal by overseas tax authorities, increasing both administrative burden and financial exposure.

In this guide, we explain how businesses based in the UK can reclaim VAT refunds from supplies created abroad, the practical implications of EU VAT on UK businesses and how businesses can stay compliant with HMRC and the VAT legal frameworks from other jurisdictions.

What is EU VAT in a UK context?

EU VAT is value added tax charged by individual EU member states on goods and services supplied within their jurisdiction. It applies where a UK business incurs costs in another country, rather than within the UK VAT system.

The treatment of this VAT differs from UK VAT in both administration and recovery:

• UK VAT is accounted for through a VAT return submitted to HMRC
• EU VAT must be reclaimed directly from the tax authority in the country where the cost was incurred

EU VAT commonly arises in the following scenarios:

• Hotel accommodation and subsistence during business travel
• Trade fairs, exhibitions and event-related costs
• Local consultancy or professional services provided within an EU country
• Transport, fuel and other operational expenses incurred overseas

Understanding where EU VAT arises is the starting point for determining whether it can be recovered and which process applies.

Can a UK business reclaim EU VAT paid?

A UK business may reclaim EU VAT, provided it meets the conditions set by the relevant member state and the claim falls within the scope of the applicable refund rules. The ability to recover VAT is not automatic and depends on both eligibility and the nature of the costs incurred.

Claims are made under the 13th Directive VAT refund scheme, which governs VAT recovery for non EU businesses This framework allows UK businesses to submit claims for VAT incurred in EU countries, subject to local rules on recoverability and supporting evidence.

Each claim is submitted directly to the tax authority in the country where the VAT was incurred. HMRC does not process or oversee these claims. As a result, businesses must comply with the specific procedural requirements, formats and deadlines set by each individual EU jurisdiction.

What types of EU VAT can be reclaimed?

The recoverability of EU VAT depends on both the nature of the expense and the rules applied by the individual member state. Not all VAT incurred overseas is eligible for recovery, and each category of cost must be considered in line with local legislation.

Common categories where VAT may be recoverable include:

• Accommodation costs incurred for business travel (subject to local restrictions)
• Exhibition and event fees, including stand space and related services
• Professional and consultancy services supplied within the EU
• Business travel and transport costs, including certain logistics expenses

However, some types of expenditure are frequently restricted or excluded from recovery:

• Entertainment expenses, such as client hospitality
• Subsistence costs in certain jurisdictions, depending on how they are classified
• Passenger vehicle costs, including purchase, hire and associated running expenses

Each EU country applies its own recovery rules and interpretations. As a result, a cost that is recoverable in one jurisdiction may be wholly or partially blocked in another. A detailed review of the local position is required before including any expense within a claim.

The EU VAT reclaim process (13th Directive)

The EU VAT reclaim process operates under the 13th Directive and follows a structured, country-specific approach. Each stage must be completed accurately to support a valid claim and minimise the risk of rejection.

The process typically involves:

• Identifying VAT incurred in each EU country and separating it by jurisdiction
• Reviewing the eligibility of each expense in line with local VAT recovery rules
• Collating valid VAT invoices and supporting documentation to evidence the claim
• Obtaining a certificate of taxable status from HMRC to confirm the business’s VAT registration
• Submitting the claim to the relevant EU tax authority in the required format
• Responding to any follow-up queries, additional information requests or audits from the overseas authority

Each EU member state applies its own procedural requirements, including formats, languages and submission methods, which must be followed precisely.

Deadlines apply. In most cases, claims must be submitted by 30 June following the end of the calendar year in which the VAT was incurred. However, this deadline can vary by country, and late submissions are typically rejected without appeal.

Minimum claim thresholds may also apply, meaning that claims below a certain value will not be accepted. These thresholds differ between member states and should be reviewed before preparing a submission.

Practical implications for UK businesses

EU VAT recovery has direct operational and financial implications that need to be managed as part of ongoing VAT compliance:

• Cash flow: delays in submitting claims or rejections by overseas tax authorities can result in VAT remaining unrecovered for extended periods, increasing overall cost
• Administrative burden: claims must often be prepared and submitted separately for each EU country, with different formats, languages and evidential requirements
• Compliance risk: incorrect claims, unsupported expenses or failure to meet local rules may lead to challenges, partial rejections or full refusal

For businesses that regularly incur EU VAT, these factors can accumulate quickly. Ongoing monitoring of overseas expenditure, combined with a structured approach to identifying and submitting claims, is necessary to maintain control over costs and reduce the risk of errors.