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HMRC internal manual

VAT Place of Supply (Goods)

Main rules: distance selling: dealing with claims of overpaid UK VAT

If a distance seller submits an Error Correction Notice for overpaid UK VAT

Before processing any claims for overpaid UK VAT, you should firstly consider ‘capping’:

  • Amounts of tax stated to have been overpaid as output tax under section 80 of the VAT Act 1994 are subject to the capping provisions in section 80(4). Therefore, claims submitted now cannot go back further than 4 years. This time limit will be dependent on the nature of the claims submitted (see section 80(4ZA)). There is more detailed guidance in VAT Refunds Manual at pages VR2800 – VR2860 inclusive;
  • When reviewing the claim, you should consider these capping provisions to decide whether this claim should be wholly or partly rejected on these time limits; and
  • If the claim still stands in whole or in part it should be repaid – subject to meeting the evidence requirements outlined below.

Evidence requirements

Before processing any claims for overpaid UK VAT, you must verify the place of supply. To assist in this verification the business should be asked to provide details of the net values and the VAT concerned by:

  • calendar month; and
  • the country of supply.

Claims should be rejected unless the business can demonstrate they meet all the conditions to make the other Member State the place of supply (VATPOSG3530). Claims for a refund of UK tax can be made providing the business can demonstrate:

  • they are over the threshold (in the case of non-excise goods);
  • the goods are excise items; or
  • they have voluntarily elected in writing to HMRC to make the other Member States the place of supply.

This applies whether or not the business has actually registered for VAT in the other Member State because, as a matter of law, the place of supply is not the UK.

VAT return adjusted

If in the course of compliance work you encounter businesses who, rather than submit Error Correction Notices, have adjusted their VAT Accounts to recover similar overpayments of UK VAT, the same levels of evidence are required and referrals to the relevant Member State should be made.

Reporting requirements

Where HMRC agrees the place of supply is in another Member State and the business’s refund claim has been accepted you should inform the business that their refund claim will be paid. Where it is not clear that the business has registered for VAT in that other State, you should also tell them that HMRC will take steps to notify the relevant Member State of this under the provisions of Article 13 of EC Regulation 904/2010. You must make it clear that this is for revenue protection purposes alone and it is the business’s responsibility to notify the Member State directly if they have not done so.

HMRC’s notification under Article 13 of EC Regulation 904/2010 must be done through VAT International Team in Liverpool by following the guidance at point 6 on the ‘Administrative Cooperation Page’.

If further advice is required you should contact the Retail VAT Unit of Expertise in the first instance, providing full details.