UK VAT Refunds for Overseas Businesses: HMRC Announces Important Changes

HMRC has updated its guidance on UK VAT refunds for overseas businesses that form part of a VAT group, introducing changes designed to make the refund process fairer and more consistent.

The update, outlined in Revenue & Customs Brief 10 (2026), clarifies how non-UK businesses should submit future VAT refund claims, introduces transitional arrangements and provides an opportunity to have certain previously rejected claims reconsidered.

For international businesses that incur UK VAT, understanding these changes could help recover VAT that may previously have been difficult to reclaim.

What Has Changed With UK VAT Refund Claims?

Non-UK businesses that meet the relevant eligibility requirements can use the overseas VAT refund scheme to recover VAT incurred on qualifying UK business expenses.

However, the rules surrounding VAT groups have historically created complications, particularly following the UK's departure from the European Union.

Before Brexit, businesses established outside the EU generally had to submit refund claims through their VAT group's representative member, even where another group member had incurred the VAT.

In certain circumstances, EU-established businesses were able to submit claims in their own name.

From 1 January 2021, the rules required all non-UK businesses belonging to a VAT group to submit refund claims through the group's representative member.

This created an unintended problem for some businesses, particularly where the representative member was registered for UK VAT and therefore unable to make a claim under the overseas refund scheme.

As a result, some businesses were unable to recover VAT that would otherwise have been eligible for repayment.

New Rules Allow Individual VAT Group Members to Claim

HMRC has now addressed this issue by changing how overseas VAT group members submit refund claims.

Under the updated approach, each eligible non-UK business must submit its own claim for UK VAT that it has incurred, regardless of whether it is established within or outside the EU.

This means:

• Individual VAT group members can claim qualifying UK VAT in their own name.

• Claims must be submitted by the business that actually incurred the VAT.

• A VAT group's representative member can only claim VAT that it has incurred itself.

• The same approach applies to eligible overseas businesses, whether established in the EU or elsewhere.
  

The changes aim to provide a more consistent process and remove barriers that previously prevented some overseas businesses from recovering UK VAT.

Transitional Arrangements for 2025/26 VAT Refund Claims

To help businesses adjust to the new requirements, HMRC has introduced transitional arrangements for the 2025/26 prescribed year.

For UK VAT incurred between 1 July 2025 and 30 June 2026, HMRC will accept eligible refund claims submitted by either:

• The individual VAT group member that incurred the VAT.

• The VAT group's representative member.
  

This transitional flexibility allows businesses to use either approach for the relevant period.

However, there is an important deadline to be aware of.

The deadline for submitting claims for the 2025/26 prescribed year is 31 December 2026.

Businesses with eligible UK VAT expenses during this period should review their records and ensure claims are submitted before the deadline.

Previously Rejected VAT Claims Could Be Reconsidered

Another important development is the opportunity for businesses to request a review of certain VAT refund claims previously rejected by HMRC.

HMRC has confirmed that it will reconsider qualifying claims relating to VAT incurred from 1 January 2021 onwards, where those claims were rejected because they were not submitted by the VAT group's representative member.

This applies provided the VAT has not subsequently been included in another refund claim.

For affected businesses, this could create an opportunity to recover VAT that was previously denied due to the administrative rules introduced following Brexit.

Businesses should review any rejected claims from this period to establish whether they may qualify for reconsideration.

What Should Overseas Businesses Do Next?

The updated guidance presents an opportunity for non-UK businesses to review their VAT recovery arrangements and ensure they are following the correct procedures.

Businesses that belong to overseas VAT groups should consider whether they need to:

• Review how future UK VAT refund claims are submitted.

• Identify which VAT group member incurred the relevant UK VAT.

• Check whether eligible expenses have been left unclaimed.

• Review previously rejected claims dating back to January 2021.

• Prepare any outstanding 2025/26 refund claims ahead of the December deadline.
  

Taking action now could help businesses recover eligible VAT and avoid further complications with future claims.

Need Advice on UK VAT Refunds or VAT Group Arrangements?

VAT recovery can be particularly complex for international businesses, especially where transactions involve multiple companies or overseas VAT groups.

Understanding the updated rules and identifying potential refund opportunities could make a meaningful difference to your business's tax position.

At SJC Chartered Accountants, we can help businesses navigate UK VAT requirements, review their VAT arrangements and understand their eligibility for refunds.

Whether you need assistance with an upcoming claim, a previously rejected refund or wider VAT group matters, our team is here to help.

Get in touch with SJC Chartered Accountants to discuss your VAT position and how the latest changes may affect your business.