Please explain the VAT tax

[mamkmm2]

OK, I'm sure this has been asked before but the search engine is having a personality disorder for me this morning. I've even looked this up online and while clarified about some things become more confused about others.

 

In July we are taking a British Isles tour. We'll be visiting England, Wales, Scotland, Northern Ireland and Ireland. First, do all of those countries have the same VAT tax of 20%? And secondly, what is that 20% added to? And do prices on say a menu include the 20% or do I need to be aware that another 20% will be added at the end of the ticket?

 

I know VAT is similar in some ways to the sales tax here in the US which is more variable by location but at the same time the VAT seems to cover different items.

 

Also, I understand as a non-EU resident I may qualify for a VAT refund on certain items but the process doesn't seem to be very clear. A few articles say that some merchants will refund it right there at the register. Some will fill out a 407 that you take to customs to get a refund on but you can't check anything, it all has to be carried on which may not be practical. And then there are some merchants that don't participate in the VAT refund program at all and you are pretty well stuck. The refund policy seems like a huge hassle, perhaps purposefully so.

 

For the moment things are basically clear as mud though I do have a basic understanding. Can someone help answer the questions above? Thank you, your time is appreciated.

[Darcy15]

http://gouk.about.com/od/ukcurrencymoneymatters/a/What-Is-Vat-And-How-Do-I-Claim-A-Vat-Refund.htm :)

[Darcy15]

https://www.gov.uk/tax-on-shopping/vat-duties :)

[Ravenscroft]

The 20% VAT rate applies to the United Kingdom, so that's England, Northern Ireland, Scotland and Wales.

 

I believe that the rate in Ireland is 23% but I know nothing about the system there so can't advise.

 

The gov.uk link above should be helpful, but just to clarify, in shops the price you see displayed is the price you pay. Same for restaurants. Sometimes your till receipt will show VAT separately but it's just to show the breakdown, you haven't been charged additionally for it. A common example of this is at petrol (gas) stations for example.

If you're buying for business purposes you will usually see a 'net' price, then the VAT shown separately then the actual total. But I can't think of an instance where someone coming here on holiday would be affected by that. Most of us in our everyday lives don't give VAT a second thought.

 

Can't help much regarding claiming back, but you can only claim back on goods purchased (and I believe there's a minimum amount of purchase before you can make a claim). You can't claim back for VAT on restaurant bills, petrol etc.

 

I see your cruise is quite soon - have a wonderful time!

Edited June 4, 2016 by Ravenscroft

[Bob++]

If you buy an expensive item, the shop may well offer "VAT free purchases" for foreign visitors like you. They will explain the procedure.

 

If they don't, you can still claim it back when you leave. You have to get a VAT 407 form from the retailer, then show the goods, the completed form and your receipts to customs at the point when you leave the EU. Customs will approve your form and then you then take it a refund booth to get paid. You may be charged a fee.

 

Bear in mind that you can't get a refund for:

- goods you’ve already used in the EU, such as perfume

- service charges, eg hotel bills

- admission charges, eg The Edinburgh Tattoo

- unmounted gemstones

- gold over 125g

Edited June 4, 2016 by Bob++

[mamkmm2]

Thanks for all replies. The big difference I see, and what was making it somewhat more difficult for me to see clearly, is that here in the state sales tax does not get added on until purchase ... so the price you see advertised does not include whatever percentage it is.

 

So basically, unless there is an additional service fee charged by a restaurant or pub, the price of an item is the price at the registered because the VAT is already built in. Correct?

[Mim Lloyd]

Correct. This is why we never give VAT a thought - it's already included in the price. Yes, service/gratuity/tip can be an added extra but it's at your discretion. Some restaurant menus may state that an additional 10% of the bill may be added as a service charge. It's not law or compulsory, if you leave it on your bill you don't have to pay any extra as a service/tip charge. Or you can just ask them not to add it and then pay what you want as a tip - or none if you wish! Tips are no where near in the UK the big thing they are in the US. We generally think that they're nice to have if they come along but they're certainly not expected as a given right!

[Host Bonjour]

Best to keep thinking of the VAT more or less as a Sales Tax Equivalent and the way it is displayed on receipts, tends to be disclosure...that's all - either the rate %, or the VAT amount added to the tab.

 

There are a few steps required that can be time consuming & frustrating, but worth it, in order to get the refund. Stores can be quite accommodating depending upon their size and set up - larger stores tend to be better able to assist with it (makes sense) then smaller shops but then it depends upon the business..souvenirs vs. maybe exclusive items that cost quite a lot wherein VAT refunds on transactions might be routine. Look for the Global Refund sign in stores - also there are per country, minimum purchase amounts before a refund is granted and as I think might have been stated, an item must be unused or not worn. I'll attach a link at the end of this post.

 

I tend not to purchase many pricey items whilst on holiday but did buy a purse in London at John Lewis; went to their refund processing department - quick, courteous and easy. I was told to present it at Gatwick BUT I was flying on to Italy and so as I was not leaving the EU could not get the refund - even though different currencies - I knew Italy was NEVER going to do the conversion from Sterling to Euros to Dollars for a refund. I didn't stop trying but needless to say, it never happened. I *think* the clerk at John Lewis was correct all along and my form ought to have been at least processed at Gatwick - perhaps not the refund processed - but the agent seemed quite not interested in doing so. I get it...coming from a tax background myself, the stuff is just not fun...or the person was just not having a great day. It wasn't that much money or I'd have fussed a bit more - my flight to Italy was delayed 8 hours :(

 

Lesson being: keep track of the VAT but decide for yourself about claiming the refunds - the stores, the procedures, the ports. As with many things, it will a personal choice for you whether or when to claim refunds but it is always helpful to know what one is paying for anything - how much goes to the proprietor for actual goods/services and how much represents a tax/government surcharge on the tab. Hope this helps :) Have a great cruise of the British Isles and Ireland - don't refer to the Republic of Ireland as a British Island once there ;) they'll politely tease you a bit!

 

http://www.frommers.com/tips/miscellaneous/vat-chance-how-to-cut-your-vacation-costs-with-tax-refunds

[Bob++]

The main reason that you will see VAT on a receipt is because a UK business can offset tax paid (on a hotel bill for example) against the VAT that they pay down the line.

 

If I import widgets from China and sell them wholesale I have to add VAT to the price. If I stay in hotels on business, buy a car, a meal or a business suit, I can deduct the VAT I paid from the VAT I have to hand over to the government at the end of my tax period. It's not that simple of course, but you get the idea.

[turnip eater]

Interesting reading

 

https://en.m.wikipedia.org/wiki/British_Isles

 

Oh the history!

Edited June 4, 2016 by turnip eater

[Thejuggler]

In the UK business to customer prices MUST include VAT as it is only the end consumer who ultimately pays VAT.

 

Any extra on retaurant bills is an optional service charge.

[VMax1700]

In the UK business to customer prices MUST include VAT as it is only the end consumer who ultimately pays VAT.

 

Any extra on retaurant bills is an optional service charge.

 

Across the EU, the price you see is the price you pay!

[Mairnealach]

This is how Brown Thomas, an up-market department store in Grafton Street, Dublin, handles VAT free shopping. I imagine most large stores, which have a large tourist business, act similarly.

 

http://www.brownthomas.com/services/tax-free-shopping-in-ireland/page/taxfreeshoppinginireland

[Bob++]

Note that Tax free worldwide charges a fee for handling the rebate: They do not specify the amount or a percentage.

 

For providing the Tax Free service, we charge the shopper a processing fee for each transaction. This processing fee varies depending on the amount you have spent. By signing the form and/or using this service the shopper accepts and expressly authorises that a service charge is deducted from the Value Added Tax amount refundable.

Edited June 4, 2016 by Bob++

[Cotswold Eagle]

 

I was told to present it at Gatwick BUT I was flying on to Italy and so as I was not leaving the EU could not get the refund - even though different currencies - I knew Italy was NEVER going to do the conversion from Sterling to Euros to Dollars for a refund. I didn't stop trying but needless to say, it never happened. I *think* the clerk at John Lewis was correct all along and my form ought to have been at least processed at Gatwick - perhaps not the refund processed - but the agent seemed quite not interested in doing so.

 

No, you and the clerk were both mistaken. The form can only be processed at the point of leaving the EU, so there was nothing that could be done at Gatwick.

[Cotswold Eagle]

Some will fill out a 407 that you take to customs to get a refund on but you can't check anything, it all has to be carried on which may not be practical.

 

Just to clear this point up - usually there will be Customs desks both before and after check-in (i.e. landside and airside), so you can present the goods even if you intend to put them in checked baggage. Certainly this is the case at Heathrow and the locations are shown clearly on terminal maps (and have large red signs, if I remember correctly!)

[mamkmm2]

Just to clear this point up - usually there will be Customs desks both before and after check-in (i.e. landside and airside), so you can present the goods even if you intend to put them in checked baggage. Certainly this is the case at Heathrow and the locations are shown clearly on terminal maps (and have large red signs, if I remember correctly!)

 

Thank you for the clarification.

[Kartgv]

Very interesting and informative, thank you to all who posted. One more complicated question - what happens when you are leaving by ship rather than by air? Our ship cruises the British Isles, then goes to Denmark, Norway, Iceland, then ends in New York. Is there any way we could get VAT refunds - if so, where?

[mattR]

Do you just collect all your receipts from everything from eating out to buying t-shirts to admission fees and claim a total for all these items or is it only good for expensive purchases? Can you only claim receipted for item bought in England if you are departing from Gatwick or can you claim items bought in France/Spain and Italy as well?

[digitl]

VAT (UK) v sales tax (USA) simplified.

 

VAT is included in displayed prices so what you see is what you pay.

 

Sales taxes are added on to the displayed prices so purchases need some maths before the real price can be arrived at.

 

I know which I prefer!

[turnip eater]

Do you just collect all your receipts from everything from eating out to buying t-shirts to admission fees and claim a total for all these items or is it only good for expensive purchases? Can you only claim receipted for item bought in England if you are departing from Gatwick or can you claim items bought in France/Spain and Italy as well?

 

https://www.gov.uk/tax-on-shopping/taxfree-shopping

 

This was explained earlier by Bob, but above is the UK government answer. No refund on services......ie eating out. If you buy food in a store/supermarket , in the UK, there is no tax.

Edited June 6, 2016 by turnip eater

[Bob++]

A stall holder in Camden Market is not going to be able to complete a Form 407. This service is largely confined to the larger or more upmarket shops in tourist areas. Simply keeping receipts is no good at all.

 

In fact most visitors don't get any benefit from this. If you want perfume or a handbag, buy it in duty free at the airport. If you buy something heavy (whisky maybe) the retailer will probably be able to ship it to you, free from UK tax.

 

If you try to claim a refund in, say, Italy, for goods you bought in the uk, you should allow plenty of time. Even with the correct paperwork, the system is not all that well understood everywhere and the refund may not really be worth the effort.

[turnip eater]

Would a stall holder in Camden Market give receipts? ;)

 

mattR, I think you'll just have to let the UK keep your tax 'donation' to help us fill in the potholes in our roads. Or are you going to buy lots and lots of goods when in Europe?

Edited June 6, 2016 by turnip eater

[insanemagnet]

VAT (UK) v sales tax (USA) simplified.

 

VAT is included in displayed prices so what you see is what you pay.

 

Sales taxes are added on to the displayed prices so purchases need some maths before the real price can be arrived at.

 

I know which I prefer!

On the other hand if people actually realised that on a £5 purchase they were paying £1 tax on top, they might ask a few more questions of politicians.

[SteveH2508]

Do you just collect all your receipts from everything from eating out to buying t-shirts to admission fees and claim a total for all these items or is it only good for expensive purchases? Can you only claim receipted for item bought in England if you are departing from Gatwick or can you claim items bought in France/Spain and Italy as well?

 

It is only possible to reclaim the VAT on large purchases (over about 90 Euros IIRC) which are being taken home for use at home overseas. Frankly, there is little, if anything, that you might want to buy in UK or Europe that fits that bill. Things are generally quite expensive here...:mad: