Under certain circumstances, non EC based businesses are entitled to recover VAT that they incur in the UK. However, HMRC rejected a number of valid claims for VAT refunds earlier this year due to an unannounced policy change. Following lobbying HMRC has now backed down and effectively announced a retrospective introductory period for its change in policy.
Those familiar with the introduction of the three year cap and subsequent lobbying for an introductory period will no doubt see similarities and this is a good indicator that HMRC should simply change its position overnight without any announcement to affected businesses. One of the main criteria for making a claim is that the business must have a valid certificate of taxable status from their own tax authority where the business is resident.
The certificate must follow set criteria in order to be accepted as valid by HMRC. For a number of years non EC based tax authorities, the USA being a prime example, have issued certificates containing some but not all of the criteria required in UK VAT law.
In the case of the tax certificates issued by the IRS to the tax payer, these clearly stated that the businesses were resident tax payers in the USA but did not state the address of the business. Following an internal audit HMRC were advised by their auditors that the certificates were invalid and that any claims submitted for the claim year 1 July 2016 to 30 June 2017 that were submitted by the due date of 31 December 2017 should be rejected. This change was announced after the end of the claim year and did not allow businesses any opportunity to seek a revised certificate of taxable status.
HMRC has now announced that where a claim for 2016-17 was processed and rejected after 23 May 2018 on the basis that it was accompanied by an invalid certificate of taxable status, the claim will now be reconsidered. Claims rejected before this date will remain unpaid. Going forward claims made for the claim year from 1 July 2017 to 30 June 2018, which have to be submitted before 31 December 2018, have an extension of time until 31 March 2019 to obtain and submit a certificate of taxable status that meets the revised criteria.
If you or your client has had a UK VAT reclaim rejected by HMRC on the basis that the certificate of taxable status was not valid then please call our free VAT helpline
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