"How can I request a refund for overpaid taxes abroad?"

What taxes may be applied when we travel and purchase goods from abroad?

Products purchased from abroad on the internet or while travelling may carry additional fees and taxes. Those are VAT and import duty fees   How and when we pay them, depend on the type of product, and its value. Typically, goods valued at over £135 are subject to import charges when brought to the UK (this also applies if products are ordered over the internet or sent to us by someone from abroad)  

Below £135 value, import duty does not apply, although it may be charged on excise goods like tobacco or alcohol.

If products are sent from abroad, the delivery company contacts the recipient, stating the amount of tax owed. This is normally obligatory to settle before the goods are delivered to avoid them being sent back to the sender.

 Whether we have to pay the import duty or not, VAT charges apply at the rate applicable in the country of purchase.   

Those may be applied directly to the price of products in shops abroad or on products sent from abroad.

Only gifted items valued below £39.00 are not subject to VAT.

Can individuals receive reimbursement?

Until the end of 2020, British travellers to Europe could claim back the VAT added to their purchases abroad (via tax rebate). This has ended with Brexit for British and UK travellers making purchases in the UK. However, being part of the EU, Ireland may still offer VAT refunds to EU travellers. However, not all retailers and applications must be launched within three months of purchasing goods in Ireland or the EU.

Generally, the EU countries still issue VAT refunds to non-EU residents on purchases acquired, but only if they travel within the EU.

On a positive note, it is worth mentioning that international customers can take advantage of the shop-and-ship services offered by bigger UK retailers like Selfridges, Harrods, and Harvey Nichols. These services mean that products purchased and shipped to them are VAT-free.   

When travelling to the US and Canada, British tourists must be aware that neither country has a sales tax refund system for international travellers. However, some States may make exceptions to this under their own laws, subject to minimum purchases, in relation to specific goods, and under terms and conditions.

Where to apply and what forms to use?

British businesses and individuals may be charged non-resident tax if they generate income in a country where they do not reside. This may relate to online sales, contracts for goods and services negotiated by their agents in this country, and so on. Taxes may have already been calculated into the price of goods and services, and their value declared on the Non-Resident Tax form sent to the non-resident, the beneficiary, at the end of the financial year. Or the tax office may send the obligation to settle the due tax under its jurisdiction.

The above obligation to pay due tax by a non-resident may also apply to properties owned and rented abroad.

The UK’s double taxation agreements with other countries aim to establish which country has the right to the tax charge to prevent double taxation.

 In many cases, non-resident tax can be reclaimed; however, due to the complicated process and the importance of applying individual circumstances to the rules, it should be carried out by a chartered accountant.  

Can a business delay paying tax?

UK businesses no longer pay VAT on imports at the border, but instead use the postponed VAT accounting scheme. This means they pay VAT liability on the return, thus delaying the payment and significantly improving their business cash flow. 

The important point to remember is to set your business accounts’ VAT code for the postponed VAT accounting (PVA)