How to get VAT refunds on returned products

A guide for EU-based businesses that sell to the UK

EU business getting a VAT refund on UK returns

Your sales to the UK are going well thanks to Spring GDS’s cross-border shipping solution. But when your UK customers want to return some items, you’ll need to know how to manage VAT on your returned exports.

Who pays VAT on e-commerce exports from the European Union (EU) to the UK varies depending on the value of your sales and your selected delivery method. This means that, when items are returned to you, these same factors will determine who should apply for the VAT refunds. 

VAT refunds on exports below £135 

With Spring GDS’s landed cost calculator, consumers can calculate and pay the VAT due on purchases below £135 at checkout. You, as the seller, need to file this VAT with the British tax authorities: Her Majesty's Revenue and Customs (HMRC).  
When selling via an online marketplace to buyers in the UK, the marketplace is obliged to collect UK VAT on sales valued up to £135. 

How to claim back VAT when a consumer returns a product 

If one of your British e-commerce customers wants to return an item that was part of an order below £135, you can deduct the VAT they paid from your next VAT filing. Simply download proof of the product’s export and consequent re-import from the Spring GDS portal, where you can track and manage your outbound and return shipments
If you’ve sold your goods via an online marketplace, the recipient will need to request a VAT refund via the marketplace. 
Note: If and when your e-commerce business needs an independent audit, you’ll need to provide accurate data of all exported and re-imported products. In your Spring GDS portal, all the data you need will be tracked in one place.  

VAT refunds on exports above £135 

For sales to the UK that are valued above £135, who handles VAT and Duty depends on whether you’ve shipped the goods as Duty at Place (DAP) or Delivery Duty Paid (DDP). 
If an order was shipped with the Duty at Place (DAP) delivery method, your British customers will need to pay VAT, Duty and a local administration fee upon receiving the package. They’ll receive a bill from the local carrier that lists the additional costs that they need to pay. 

Who applies for VAT refunds for Duty at Place (DAP) shipments? 

If a shipment can't be delivered and needs to be returned to sender, the VAT & Duty invoice hasn't been paid. In this case, no return payment is applicable. If a customer decides to return (part of) their order after they've accepted it, they can apply for a VAT refund with HMRC.  
Shipping orders on a Delivery Duty Paid (DDP) basis means you can spare your British customers the unwelcome surprise of having to pay additional costs upon delivery. With a landed cost calculator in place on your web store, they can calculate and pay any due VAT and Duty at the online checkout.  
When you ship with Spring GDS – the all-in-one solution for EU - UK e-commerce shipping – your online customers pay VAT and Duty at checkout. We pay HMRC the due amount, which is then added to your Spring GDS invoice. This way, you benefit from optimal transparency with minimal hassle.  

Who applies for VAT and Duty refunds for Delivery Duty Paid (DDP) shipments? 

If a DDP shipment can’t be delivered, you can claim back the paid VAT as part of your monthly VAT filing. The re-export report and tracking events in the Spring GDS portal can be used as proof to support your VAT refund claim. 
If consumers want to return some of their items, we make it easy for them to do so on your very own online consumer returns portal. Here, they can indicate which items they'd like to return and generate a returns label. We then reclaim the VAT and Duty that we’ve paid from HMRC and customs - all the proof we need to back up our refund claims is right there in the Spring GDS portal. As soon as we’ve received the refund, it will be transferred to your account.  
The above-mentioned DAP or DDP rules also apply for goods sold via an online marketplace. 

VAT refunds made easy with Spring GDS 

Managing VAT on exports doesn’t need to be complicated. With outbound and return shipments all managed in one place, you can get the proof of export and re-import that you need to claim VAT and Duty refunds in seconds. 
Get in touch with our team to see what Spring GDS can do for you today. 
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