HMRC Updates VAT Notice 723A: What Accounting Firms Must Know

HMRC refreshed VAT Notice 723A on 3 July 2026, consolidating the rules that govern how businesses established outside the UK can reclaim VAT incurred here, and how UK businesses can pursue equivalent refunds on VAT paid abroad. For accounting firms, auditors, and CFOs managing cross-border clients, the notice sets hard procedural requirements that directly affect claim validity. Miss a deadline or misfiled document and the claim fails entirely.

Who the Scheme Covers

The refund mechanism is open to businesses registered for tax purposes in a country outside the UK, provided they satisfy two conditions at the time of the claim.

Core Eligibility Conditions

First, the claimant must not be registered, liable, or eligible to register for VAT in the UK. Second, the business must have no place of business or other residence in the UK and must not make supplies here, with two narrow exceptions: transport services linked to the international carriage of goods, and supplies where the UK recipient accounts for VAT under a reverse-charge arrangement.

Reciprocity is also a condition. HMRC will only refuse a claim on this ground where the claimant's home country operates a refund scheme for its own turnover taxes but specifically excludes UK businesses from accessing it.

Isle of Man Treatment

For VAT purposes, the Isle of Man is treated as part of the UK under the notice. VAT charged there under Manx legislation is treated identically to UK VAT, and the same refund procedure applies. Every reference to the UK in the notice therefore includes the Isle of Man.

Northern Ireland and EU Businesses

EU-established businesses whose claims relate to VAT on goods expenditure incurred in Northern Ireland are directed to a separate HMRC process. That route operates under different rules reflecting Northern Ireland's continued alignment with EU VAT arrangements on goods.

What VAT Cannot Be Reclaimed

The scheme does not cover all UK VAT indiscriminately. Several categories are excluded, and accounting firms should screen client expenditure carefully before preparing a claim.

Blocked Input Categories

VAT on goods and services used for non-business activities is not recoverable, though where a supply has a mixed use, the business element can be reclaimed. On car hire or leasing with mixed business and private use, only 50% of the VAT incurred qualifies. No refund is available on most ordinary business car purchases.

Business entertainment and hospitality are largely blocked. A narrow exception exists for entertainment provided to overseas customers, but only where it is of a very basic nature. VAT on goods bought for resale that directly benefit travellers, such as hotel accommodation, is also excluded.

Where goods or services are used to make supplies that would be exempt under Schedule 9 of the Value Added Tax Act 1994, regardless of where those supplies actually take place, no refund is available on the VAT attributable to them. Where costs are genuinely mixed between taxable and exempt supplies, the claimant recovers only the taxable proportion.

Certain second-hand goods, including cars and antiques, where no VAT invoice is issued also fall outside the scheme. And while exports may be zero-rated rather than triggering a refund claim, firms should verify that the supplier holds the required evidence.

The Prescribed Year and Claim Deadlines

HMRC structures refund eligibility around a fixed twelve-month period running from 1 July to 30 June of the following calendar year. This is called the prescribed year, and it defines both the minimum claim period and the submission deadline.

Period and Amount Thresholds

A claim must cover at least three calendar months, unless it represents the remainder of the prescribed year after earlier applications have already been submitted. A claim covering less than the full year but at least three months must reach a minimum of £130 to be submitted. The minimum drops to £16 only where the claim period is either the full prescribed year or represents that final remainder portion.

Items missed on earlier applications within the same prescribed year can be added to a subsequent claim, as long as the underlying VAT was charged in that year.

The 31 December Deadline

All applications must reach HMRC by 31 December following the end of the relevant prescribed year. HMRC applies this deadline strictly, and claims are processed on a first-come, first-served basis. There is no discretion described in the notice for late submissions.

For firms planning to submit electronically, registration must be requested by 30 November at the latest to allow time for HMRC to complete the process before the 31 December cut-off. Firms are advised not to contact the VAT helpline about refund scheme queries; HMRC states that helpline staff will simply direct callers back to the notice.

How to Submit a Claim

HMRC accepts both electronic and paper submissions, though the electronic route requires prior registration. The process for each route carries specific document requirements that determine whether a claim succeeds.

Electronic Route

Access to the electronic system requires a registration request sent to HMRC in advance. Once received, HMRC aims to make contact within 15 calendar days to begin the registration process and provide guidance. After submission, HMRC issues a dated receipt. If no receipt arrives, the claimant should follow up by email, using a subject line that identifies it as a claim. If no response has been received within six months of submission, HMRC asks claimants to follow up again, attaching the date-stamped receipt as evidence.

Paper Route

Paper claims go to the VAT Overseas Repayment Unit at HMRC's Compliance Centres in Newcastle. HMRC may request proof of postage to confirm the claim was posted on or before 31 December. HMRC can correspond by email only where the claimant has given explicit written consent, either within the claim itself or by a prior written agreement.

Document Retention

Original hard copies of all documents associated with the claim must be retained until the claim is fully processed. HMRC reserves the right to request them, and failure to produce them can result in partial or total rejection of the claim. The original certificate of status must accompany the submission. Copies, rather than originals, are acceptable for all other supporting documents sent with the application.

VAT Groups and Import VAT

Representative Member Rules

Where VAT is incurred by members of a VAT group, the representative member must submit the application on behalf of all group members. Because invoices may not be addressed to the representative member, the certificate of status must list the names of every group member that actually incurred the VAT in question.

Import VAT Claims

Non-UK businesses importing goods into the UK can use the scheme to reclaim import VAT, provided no VAT relief was available at the point of import. However, if the import itself triggers a liability to register for UK VAT, the scheme is not available. Import VAT can only be claimed by the owner of the goods, defined as the party with the right to dispose of them as owner.

Practical Implications for Accounting Firms

The July 2026 update does not introduce entirely new policy, but the consolidation matters for practice management. Firms using crypto compliance reporting workflows that span multiple jurisdictions will recognise a familiar pattern: tight deadlines, strict document retention, and eligibility gatekeeping that requires client-level screening before any claim is prepared.

Digital asset businesses with a UK trading presence, such as those exhibiting at UK conferences or fairs, may incur UK VAT that cannot be treated as deductible input tax if they are not UK-VAT-registered. The 723A scheme is the correct channel for recovering that cost, subject to eligibility. Firms advising such clients should build the 30 November registration deadline and the 31 December filing deadline into their compliance calendars now.

The broader VAT digitalisation context is also relevant. The EU ViDA implementation and VAT in the Digital Age roadmap is reshaping how VAT obligations are reported and verified across Europe, and the UK's own electronic submission requirements under 723A sit within that broader shift toward digital-first VAT administration.

Firms advising UK-based crypto asset businesses on their regulatory positioning should also be aware that the FCA has finalised the UK crypto regulatory framework, adding another compliance layer that intersects with VAT obligations for firms operating at the intersection of digital assets and financial services.

Source: HMRC / GOV.UK, VAT Notice 723A