UK exporters lose out on VAT refunds

Since the 2021 VAT reforms, the complexity of selling goods and services into the EU has been a source of stress for thousands of businesses.

A Centre for Economics and Business report, commissioned by Avalara, shows that businesses are missing out on VAT recovery from their returns policies: with £0.05 for every £1.00 VAT paid unrecovered.  

In trying to understand the economic impact of EU cross-border tax complexity on UK exporters, the research has found how tax schemes that are hard to implement or are drastically different from previous ones result in businesses losing out on income, as well as reduced productivity through workers needing to spend time on understanding and applying inefficient processes.

This is evident through the returns processes currently in place by UK exporters.

According to the report, 80% of exporters have a return policy on sales to EU customers. Out of these, 9.4% of sales are returned to them yet just 35% of VAT is recovered - with 65% of VAT return claims lost. It’s perhaps no surprise that the retail sector has the worst ratio, losing more than three-quarters of VAT on returned goods.

Although the perceived complexity is the source of much frustration for retailers, it’s a challenge that can be readily addressed with the right support and help in place. Avalara’s tax compliance software and Managed VAT Reporting service including Import One-Stop Shop (IOSS), can help make sure you can keep on top of your revenue, keeping you focused on the growth of your business.

Download the full Economic cost to the UK Exporters of cross-border tax complexity report or get in touch to find out how we can help.