The World Is Getting Smaller!

AN EVER-INCREASING number of businesses are trading with companies outside of the UK and a large proportion of this trade is with other EC countries. And one of the lesser known facts about VAT is that the EC system gives some scope to recover VAT incurred while on business in other EC countries. This article considers the rules and the potential problems involved in making these claims.

Eighth Directive

The Eighth Directive is the key legislation on this subject and basically means that a taxable person can recover VAT incurred in another EC country provided he is not already registered in that country. However the key point is that the VAT must be deductible under the normal VAT rules of the country where the expenditure was incurred. See Example 1 and Example 2 below.