UK VAT refunds for EU companies: the performance date as a pitfall

VAT refunds in the United Kingdom: a separate procedure

As an EU-established company that has incurred costs in the United Kingdom, you can reclaim the VAT paid through HMRC. Unlike refunds within the EU, however, you do not submit your application through your own tax authority, but directly to HMRC. This is an important difference from the EU procedure that can lead to errors at the very first step.

The British tax year runs asymmetrically: from 1 July to 30 June of the following year, with a deadline of 31 December. More information about the British procedure and tax periods can be found in our earlier article on the changes to the British VAT refund process.

The 14-day rule: when does the performance date take precedence?

Under British VAT legislation, specifically Section 6(5) of the VAT Act 1994, the so-called 14-day rule applies. This rule states that a VAT invoice issued within 14 days of the date of actual delivery or provision of services creates a new tax point on the invoice date. In that case, the invoice date determines the tax period to which the VAT is attributed.

However, if the invoice is issued more than 14 days after the date of actual performance, this new tax point lapses. The basic tax point, being the date on which the service was actually provided, then becomes decisive. This applies in particular to services relating to land and property, such as hotel stays and room hire.

This is a specific rule of British VAT legislation that has no equivalent in the EU. Since the United Kingdom applies its own VAT legislation following Brexit, different rules apply to the UK procedure than EU companies are accustomed to.

A practical example

A transport company uses a hotel in the United Kingdom in June. The hotel, however, does not issue the invoice until August, more than 14 days after the stay. Under British VAT legislation, the performance date, June, is the decisive tax point.

This has a direct impact on the tax year. The British tax period runs from 1 July to 30 June. The June costs therefore fall in the previous tax year, with a deadline of 31 December of the current year. If the company submits the invoice based on the August invoice date, it places the costs in the new tax year. If HMRC assesses the invoice on the June performance date, the application will be rejected because it was submitted in the wrong tax period.

If the 31 December deadline for the tax period covering the performance date has already passed, the refund is permanently lost.

Which services are most susceptible to this pitfall?

The 14-day rule is particularly relevant for services where there is a time gap between actual delivery and the moment of invoicing. In the transport sector, these are primarily:

• Hotel stays and accommodation costs
• Room hire and meeting facilities

For these services, it is not uncommon for the invoice to be sent weeks or even months after the stay or provision of service, which increases the risk of a divergent tax point.

What does this mean for your refund file?

When compiling your UK refund application, it is important to check for each invoice whether the invoice date and the performance date coincide, and if not, which tax period applies under the 14-day rule. An invoice that appears at first glance to fall in the correct tax period may, based on the performance date, actually belong to an earlier or later period.

If you submit an invoice in the wrong tax period, you risk rejection by HMRC. If the correct tax period has already expired, the refund is permanently lost.

Let professionals guide you

British VAT legislation contains specific rules that differ from what EU companies are accustomed to. Delta Refund Solutions is not only well versed in EU regulations, but also in the rules that apply outside the EU, including the United Kingdom, Norway and Switzerland. We check on your behalf for each invoice whether the correct tax point is being applied, ensuring that your refund application to HMRC is submitted correctly and in full.

Feel free to contact us, we are happy to help.