Together with our partner DLA Piper and sister company VAT Global, we have put together a series of COVID-19 VAT tips that will hopefully help your business inject some welcome income into your bottom line. These VAT tips shouldn’t only be seen in the context of these uncertain times. They’re often great strategies that can be applied all year round for any finance director looking to improve liquidity for the business.
VAT Tip 1: Reviewing Past VAT Returns for Savings Opportunities
An internal audit may reveal that your business has a right to reclaim overpaid output VAT on goods or services. To expand, this could be because of a court ruling that supplies – believed to be standard rated – were, in fact, zero-rated or as a result of a Court of Justice decision conflicting with domestic law. These claims generally have a time limit. The claims, together with interest, can give rise to very significant payments.
VAT Tip 2: Reclaiming Input VAT on Past local T&E Costs
Many businesses have input VAT that they fail to claim. This is due to failure to ensure that the employees provide business with the requisite VAT invoices when they have been on a business trip. Checking and tightening up on these procedures can give rise to significant input VAT reclaims. This may be a good time for a review. EU law provides that tax authorities may accept alternative evidence if the VAT invoice is missing or non-compliant in some way. However, if this fails, you can enlist the services of a VAT compliance firm who have the resources to have issues made compliant by harnessing their relationships with hotels and suppliers. Together with our sister company VAT IT, we are able to reissue any non-compliant invoices for successful VAT returns. To learn more about this click here. An internal review (which we would be happy to do for you at no cost) can uncover significant claims going back years. For example, import certificates – that evidence import VAT paid on imported goods – can sometimes be forgotten when submitting VAT returns.
VAT Tip 3: Overseas VAT Refunds
We regard foreign VAT reclaim as one of the easiest COVID-19 VAT tips available to businesses. It’s easy to achieve with some help. The Refund Directive is an EU scheme which allows EU established businesses to reclaim VAT incurred in other EU member states. The 13th EU Directive is a similar scheme applying to non-EU established businesses. In many cases, your company may be able to claim foreign VAT from over 30 countries worldwide.
Each Member State has implemented these schemes in their national rules, with slight differences where discretion is allowed. However, a common feature is that the deadlines for filing are strict. Late claims are simply rejected.
Should your business seek to make VAT refund requests, we recommend that you treat 30 June 2020 as a hard deadline to file 13th Directive claims in each of the relevant member States until advised there is an extension.
“Our advice to businesses is to consider appointing a VAT reclaim agent to assist you in the process. VAT reclaim agents are familiar with rules in various countries. Some VAT reclaim agents operate on a contingent fee basis. Their fees are payable only if the claim is successful. VAT reclaim agents can save businesses time and costs with their easy to use software and assist with providing peace of mind that the claims are being handled professionally,” says Richard Woolich, Partner at DLA Piper.
To learn more about foreign VAT refunds and the reclaim procedure, click here.
To read further about how you can perform both a domestic and foreign VAT audit while working from home, click here.
VAT Tip 4: Sales/Promotions
Business promotions are frequently used as a means of generating increased sales and to keep customers interested in their products. Provided that your business sells a range of goods which may be subject to differing VAT rates (zero-rate, reduced rate or standard rate), selling gift card/vouchers could be one way to obtain an injection of cash into your business. Put simply, these types of vouchers are considered as multipurpose vouchers. Therefore, VAT need not be accounted for at the time of sale of the vouchers. Instead, they would be accounted for at the time they are redeemed. In addition, vouchers and gift cards can be sold online which is critical in the current climate.
This is one of the more complex VAT Tips and a complicated area of tax law. Therefore, advice should always be obtained. We can assist you to navigate this area.
We hope these COVID-19 VAT tips will give you some clear guidance during these unprecedented times. We believe that VAT can be an effective liquidity booster for businesses if you know how to utilise the various mechanisms and opportunities. If you wish to explore any opportunities available to your business or if you have any queries around VAT recovery and compliance, please get in touch with us by completing our contact form.
Content provided by Richard Woolich, Partner, DLA Piper. Original article published by our sister company VAT IT Reclaim.
To read more articles around VAT and COVID-19, visit our blog.