HMRC has updated its guidance on UK VAT refunds for non-UK businesses that are members of a VAT group.
The changes mean that eligible non-UK businesses must generally submit their own UK VAT refund claims rather than having the VAT group’s representative member submit the claim on their behalf.
HMRC has also introduced transitional arrangements and confirmed that certain previously rejected claims can be reconsidered.
For businesses affected by the change, there are important deadlines to be aware of.
What has changed?
Non-UK businesses that meet the conditions for the overseas VAT refund scheme can claim back certain UK VAT they have incurred.
Under the updated rules, where a non-UK business is a member of a VAT group, the business that actually incurred the UK VAT must submit the refund claim.
The representative member of the VAT group can only submit a claim for VAT that it incurred itself.
This is a significant change for some international businesses that previously submitted claims through their VAT group’s representative member.
Why has HMRC changed the rules?
The issue dates back to the UK’s exit from the EU.
Before 1 January 2021, different rules applied depending on whether a business was established inside or outside the EU.
From 1 January 2021, all non-UK businesses that were members of a VAT group were required to submit claims through the group’s representative member.
This meant that some EU businesses could no longer submit UK VAT refund claims in their own name.
In certain circumstances, this meant that the business which had actually incurred the UK VAT was unable to recover it, particularly where the representative member had a UK VAT registration.
HMRC has acknowledged this as an unintended consequence of the post-Brexit arrangements. The updated approach is intended to put eligible non-UK VAT group members on the same footing.
What is the new rule?
The position is now straightforward:
The non-UK VAT group member that incurred the UK VAT must submit its own refund claim.
The VAT group’s representative member should only submit a claim where it was the business that incurred the VAT.
This means international groups may need to review how their VAT refund claims are prepared and who is responsible for submitting them.
Transitional arrangements for 2025–26
HMRC has introduced a transitional arrangement for the prescribed year running from 1 July 2025 to 30 June 2026.
For VAT incurred during this period, HMRC will accept claims from either:
- The individual non-UK VAT group member that incurred the VAT
- The representative member of the VAT group
This provides some flexibility while businesses adjust to the new arrangements.
However, the deadline is important.
Claims relating to the 2025–26 prescribed year must be submitted by 31 December 2026.
What about previously rejected claims?
HMRC has also addressed businesses that may have lost out because of the previous approach.
HMRC will review certain claims for UK VAT incurred from 1 January 2021 onwards where the claim was previously rejected because the representative member submitted the claim.
The review is available where the VAT was not subsequently included in another claim submitted by the representative member.
Businesses that believe they are affected can ask HMRC’s Overseas Repayments Unit to reconsider the claim.
The request needs to include details such as the business name, claim reference, claim period and value, the VAT group members during the relevant period and confirmation that the VAT was not included in a later claim.
The deadline for requesting HMRC to review a previously refused claim is 31 August 2027.
Who could be affected?
The changes are particularly relevant to:
- Non-UK businesses that are members of a VAT group
- International groups with businesses incurring UK VAT
- Businesses that use the overseas VAT refund scheme
- VAT groups that previously submitted claims through a representative member
- Businesses whose UK VAT refund claims were rejected from 1 January 2021 onwards
There are specific eligibility conditions for using the overseas VAT refund scheme. For example, the business generally must not be registered, liable or eligible to register for UK VAT and must not have a business or fixed establishment in the UK.
What should businesses do?
If your business is part of a non-UK VAT group, now is a good time to review your previous and upcoming VAT refund claims.
Consider checking:
- Which group company actually incurred the UK VAT
- Who has historically submitted your VAT refund claims
- Whether claims have been submitted through the representative member
- Whether any claims have previously been rejected
- Whether rejected VAT could now be reconsidered
- Whether the 31 December 2026 deadline applies to your 2025–26 claims
- Whether any previous rejected claims need to be reviewed before 31 August 2027
It’s also worth making sure your accounting and VAT processes clearly identify which group company has incurred each item of UK VAT.
Why does this matter?
VAT refunds can represent significant amounts of money, particularly for businesses operating internationally or regularly incurring UK VAT on business expenses.
The updated rules could therefore give some businesses an opportunity to recover VAT that they were previously unable to reclaim because of the way the claim was submitted.
However, the rules and eligibility conditions can be complex, particularly where businesses have multiple entities across different countries.
Final Thoughts
HMRC’s updated guidance provides greater clarity for non-UK businesses that are members of VAT groups.
The key change is that the business which incurred the UK VAT must generally submit its own refund claim. There are transitional arrangements for the 2025–26 prescribed year, alongside an opportunity for some previously rejected claims to be reconsidered.
With deadlines of 31 December 2026 and 31 August 2027 approaching, affected businesses should review their VAT position sooner rather than later.
If you’re unsure whether these changes affect your business or need help reviewing your VAT position within a group, we’re happy to help.
📞 01527 368220
📧 info@ojwassociates.co.uk
