UK VAT refund opportunities for overseas VAT groups
15 September 2026| CATEGORIES: New HMRC Guidance, UK VAT, VAT Groups, VAT refunds| TAGS: Overseas businesses, UK VAT refunds, VAT Groups
HMRC has changed the rules governing UK VAT refund claims made by non-UK businesses that are members of a VAT group in their country of establishment.
The change, announced in Revenue and Customs Brief 8 (2026) (RCB 8/26), means that each non-UK VAT group member must now submit its own claim for UK VAT that it has incurred. HMRC will no longer accept a claim from a VAT group’s representative member unless that representative member itself incurred the VAT.
The change is particularly relevant to businesses that were affected by the rules introduced following the UK’s departure from the EU. HMRC has acknowledged that those changes had an unintended consequence for some EU VAT group members.
Importantly, HMRC has also confirmed that it will reconsider certain claims for UK VAT incurred since 1 January 2021 that were previously rejected. This could provide an opportunity for affected businesses to recover VAT that has previously been regarded as irrecoverable.
What is the UK VAT refund scheme?
Businesses established outside the UK may, subject to certain conditions, recover UK VAT incurred on business expenditure through the UK’s overseas VAT refund scheme.
The scheme can be particularly relevant to overseas businesses that incur UK VAT on costs such as business travel, accommodation, conferences, trade fairs and other UK business expenditure.
Claims are made for a prescribed year running from 1 July to 30 June, with the claim required to be submitted by 31 December following the end of that period.
For example, a claim for UK VAT incurred between 1 July 2025 and 30 June 2026 must be submitted by 31 December 2026.
How did the rules for VAT groups change after Brexit?
The treatment of VAT group members changed significantly from 1 January 2021.
Before that date, HMRC applied different rules depending on whether a business that was a member of a VAT group in its country of establishment was established inside or outside the EU.
Businesses established outside the EU were required to submit UK VAT refund claims through the VAT group’s representative member, even where the representative member had not itself incurred the UK VAT.
However, in some circumstances, a business established in the EU that was a member of a VAT group could submit a claim in its own name.
From 1 January 2021, HMRC required all non-UK businesses that were members of a VAT group to submit their UK VAT refund claims through the group’s representative member.
This meant that some EU VAT group members could no longer submit claims in their own name.
In some cases, this created a particular problem where the representative member was registered for UK VAT. The entity that had actually incurred the UK VAT could not claim it under the overseas VAT refund scheme because the claim was required to be submitted by the representative member, while the representative member was itself UK VAT registered.
As a result, there were circumstances in which UK VAT incurred by an otherwise eligible non-UK business could not be recovered.
HMRC has now recognised that this was an unintended consequence of the UK’s exit from the EU and has changed its policy to restore the previous position.
What are the new rules?
Under the revised rules, each non-UK business that is a member of a VAT group must submit its own UK VAT refund claim for VAT that it has incurred.
The representative member may only claim a refund for UK VAT that it has incurred itself. It cannot submit a claim on behalf of another VAT group member for VAT incurred by that member.
Accordingly, where several businesses within an overseas VAT group incur UK VAT, each business will generally need to submit a separate claim in respect of the VAT it has incurred.
The updated VAT Notice 723A confirms that “the business that incurred the VAT must submit the claim”, bringing the UK VAT refund rules back in line with the position that applied to eligible EU VAT group members before 1 January 2021.
Transitional arrangements for 2025/26 claims
HMRC has introduced transitional arrangements for VAT incurred during the 2025/26 prescribed year, which runs from 1 July 2025 to 30 June 2026.
For this period, HMRC will accept a claim submitted either by:
- the individual VAT group member that incurred the VAT; or
- the representative member of the VAT group.
This means that businesses that have already prepared their 2025/26 claims using the previous approach do not necessarily need to change the claimant.
The deadline for submitting claims for the 2025/26 prescribed year is 31 December 2026.
Businesses intending to make an electronic claim by 31 December 2026 should also be aware that, where they are not already registered for HMRC’s Secure Data Exchange Service (SDES), HMRC advises that access should be requested by 30 November 2026 to allow sufficient time for the claim to be submitted by the 31 December deadline.
For subsequent prescribed years, the new rules will apply and the non-UK VAT group member that incurred the VAT must submit the claim.
Can previously rejected claims now be recovered?
This is potentially the most significant aspect of HMRC’s announcement.
HMRC has confirmed that it will reconsider certain claims for VAT incurred from 1 January 2021 that it previously rejected because the representative member did not submit the claim.
The concession is subject to conditions, including that the VAT has not subsequently been included in another claim submitted by the representative member.
This is particularly relevant to businesses that were affected by the post-Brexit change and found themselves unable to recover UK VAT because of the interaction between the VAT grouping rules and the UK VAT registration status of the representative member.
Businesses that believe they may have been affected should therefore review their historic UK VAT refund claims from 1 January 2021 onwards.
The deadline for requesting HMRC to reconsider an eligible historic claim is 31 August 2027.
How RBCVAT can help
Determining whether a historic claim falls within HMRC’s new arrangements is likely to require a review of the business’s VAT group structure, the identity and UK VAT status of the representative member, the basis on which the original claim was rejected and whether the VAT has subsequently been recovered.
RBCVAT can help businesses assess whether previously rejected UK VAT refund claims may now be recoverable under HMRC’s revised policy.
Where a claim is eligible, we can also assist with preparing and submitting the claim to HMRC, helping businesses to recover UK VAT that may otherwise have remained irrecoverable.
Businesses should act well before the 31 August 2027 deadline to allow sufficient time to review historic claims and supporting documentation.
What should businesses do now?
Businesses that are members of non-UK VAT groups should consider the following:
- Review current UK VAT recovery processes
For future periods, groups should ensure that the entity that actually incurs UK VAT is identified and that it is able to submit its own overseas VAT refund claim. - Review previously rejected claims
Businesses that had UK VAT refund claims rejected from 1 January 2021 onwards should consider whether the rejection may have resulted from the post-Brexit VAT group rules.
In particular, businesses should consider cases where a non-UK VAT group member incurred the UK VAT but the representative member was UK VAT registered. - Consider historic recovery opportunities
Businesses that believe they may have lost UK VAT as a result of the previous rules should consider obtaining advice now rather than waiting until the 31 August 2027 deadline. - Act before the 31 December 2026 deadline
Businesses should ensure that 2026 claims are prepared in good time, particularly where significant amounts of UK VAT are involved.
A welcome change for affected businesses
HMRC’s revised approach is welcome news for businesses that were adversely affected by the post-Brexit VAT group rules.
In particular, businesses that were unable to recover UK VAT from 1 January 2021 because of the VAT status of their representative member should consider whether that VAT may be recoverable.
RBCVAT can help businesses assess whether previously rejected claims are eligible for reconsideration and, where appropriate, prepare and submit claims to HMRC.
Businesses should review their position now to identify any UK VAT that may be recoverable, particularly given the 31 December 2026 deadline for current claims and the 31 August 2027 deadline for requesting reconsideration of eligible historic claims.