EU Cross-Border VAT Recovery – Making the most of the new system
Tuesday February 9, 2010
With cashflow a major priority for most firms, our new VAT Alert looks at the opportunities for cost reduction and process streamlining created by the new EU Refund Directive.
Our consultant Andy Spencer guides you through five key steps to making the transition to the new system.
Five key checks to ensure cross-border VAT efficiency
A lot of attention is currently being paid in the media to the introduction of electronic filing (click here for information on electronic filing). But the major commercial challenges and opportunities created by the EU Refund Directive are less frequently discussed. In our interview with Andy Spencer (formerly VAT Director at Baker Tilly UK), Andy identifies 5 key commercial issues that need to be addressed by companies using VAT recovery providers as they transition to the new framework:
1. Is VAT being charged to you correctly? With the extension of the reverse charge to cover services, many transactions now shouldn’t include VAT ? and you shouldn’t be paying it.
2. Do you have a system for challenging incorrectly charged VAT? It’s likely that suppliers will often misapply the rules. If they do, and you don’t challenge them, you could end up paying VAT unnecessarily – and then paying commission on claims that never needed to be made. Have you got a process in place to avoid poor cashflow and extra unwanted costs?
3. Have you reviewed your VAT recovery contract? Many VAT recovery contracts enable the provider to earn commission for obtaining credit notes for wrongly charged VAT. If steps are not taken to correct the treatment of such transactions, these costs can recur year after year. And with the introduction of the VAT Package, this issue will only become more prevalent. For this reason, it’s sensible to check whether your recovery provider is incentivised to give you the best commercial advice. Have they advised you how to spot incorrectly charged VAT and eliminate unnecessary claims? Will they profit through credit note commission if simple systemic issues are not addressed? Are you being advised to make the most of the reverse charge?
4. Have you considered VAT Registration as an alternative to recovery? For many companies, VAT registration represents a more efficient method of recuperating VAT than cross-border recovery ? it’s often both quicker and less expensive. But be careful that your provider doesn’t charge you commission on the input tax!
5. Have you reviewed the status of your previous claims? With the major changes that have been introduced to the system, it’s vital to make sure that your older claims are being managed properly. Take steps to ensure that your provider (and any previous providers) presents you with a full report on outstanding claims. If claims have been delayed, you may well have interest owing to you!
To see or read the full interview with Andy, click here.
For more detail about Accordance’s Cross-Border VAT Management programme, click here.