If you are a European Union (EU) citizen and you’re planning on travelling to the UK, you may be wondering if you’ll need to pay value added tax (VAT) on the goods you plan on buying there. For example, you may wish to buy a designer suit or a fancy perfume that is rare to find in your own country. But does this mean you’ll have to pay VAT? This is an important question and it’s worth knowing the answer to, even though it’s not as simple and straightforward as it may seem. This is why in this article, we’ll explore what VAT is and whether and how you might be able to claim a VAT refund. Let’s take a closer look.
What is VAT?
VAT is a tax charged on goods and services purchased. In the UK, the standard rate is 20% although it can be less, depending on the item you purchase. For example, some utility costs have a lower VAT amount than the standard 20% while some foods and postal services are completely excluded from the payment of VAT.
Claiming a refund on VAT
Before December 31, 2020, the “VAT Retail Export Scheme” was in place and governed VAT refunds on items purchased in the UK (England, Scotland and Wales). Also known as tax-free shopping, this system is no longer in place and has been replaced by new directives that specify what goods and/or services can actually claim a VAT refund.
Bear in mind that this scheme has not changed for Northern Ireland and in this case, you may be able to get VAT refunds – sometimes – and on some goods. This will depend on every individual retailer as not all retailers offer VAT refunds. In addition to this, the goods will need to be transported out of the country within three months of purchasing them. You will also need to provide proof that you are leaving the country through flight tickets or other forms of transportation that you have arranged.
So, how can you claim a VAT refund? Bearing in mind that not all retailers offer this facility, the chances are that you will not be able to claim a VAT refund everywhere. You specifically have to ask the retailer if they do offer this and then proceed to fill out the necessary VAT return forms, which you will need to keep and present to customs on your way back to your home country.
It is important to note that you are unlikely to get 100% of your VAT refund back in most cases, because retailers generally apply an administrative fee, which will be deducted from the VAT refund itself. Therefore, be prepared for a partial refund and not a full VAT refund, in the event that the retailer offers this.
In conclusion
If you are looking for more detailed information and specific VAT return help, you’ve come to the right place. At Tax Navigator, we offer comprehensive and professional VAT return services and bookkeeping services in London to help companies and individuals navigate the complex landscape of VAT and taxes in broad terms. With a professional at your side, your business will be anchored in good practices and you’ll make sure you get the most out of your expenses in the normal course of your business. Ready to talk to us? We are here to help!