The Top 5 Reasons VAT Refunds are Rejected - and how to avoid them

The Top 5 Reasons VAT Refunds are Rejected - and how to avoid them

2025 Guide for U.S. and International Businesses

VAT refund schemes are a major cash flow opportunity for foreign companies that incur costs in the UK, EU, or UAE. Yet a significant proportion of claims are rejected each year because of avoidable errors. These rejections cost businesses millions in lost recoveries, even where the underlying expenses were fully eligible.

Drawing on HMRC Notice 723A, the EU’s 13th Directive, recent European Court of Justice decisions, and updated UAE Federal Tax Authority guidance, this 2025 review explains the five most common rejection triggers and how to avoid them. At Antravia, we regularly handle appeals and resubmissions, and these patterns appear consistently across sectors from technology and medical devices to conferences, travel, and R&D.

1. Incomplete or Invalid Documentation

Why it happens
Tax authorities require clear, compliant documentation. Claims fail when invoices are missing essential information such as the supplier’s VAT number, your business details, VAT breakdowns, or valid proof of export. European tax authorities report that more than a quarter of rejected 13th Directive claims fall into this category. HMRC applies the same strict test under Notice 723A. The UAE FTA also disallows claims if the tax invoice format does not meet statutory requirements.

Example
A U.S. pharmaceutical company reclaimed VAT on hotel stays and event services in Dubai. The receipts lacked the mandatory FTA invoice format and the claim was refused, resulting in a loss of two thousand five hundred pounds.

How to avoid it
Review every invoice for accuracy, including the VAT amount, taxable value, supplier VAT registration number, invoice date, and a clear description of the goods or services. Maintain digital scans and match each expense to supporting documentation. EU Member States now accept electronic invoices if they meet VAT Directive requirements and can be validated. Antravia clients use a structured documentation checklist that eliminates most errors before submission.

2. Missing Filing Deadlines

Why it happens
VAT reclaim deadlines are strict and vary between jurisdictions. EU 13th Directive claims must be submitted by 30 September. UK claims must reach HMRC by 31 December. UAE refund claims are due annually by 31 August. Late submissions are automatically rejected, regardless of quality. Recent ECJ decisions confirm that authorities are entitled to enforce deadlines without discretion.

Example
A U.S. technology company attended a training programme in Manchester. The finance team prepared the VAT reclaim but filed in January of the following year. HMRC rejected the entire four thousand pound refund.

How to avoid it
Create a calendar of filing deadlines for every country in which you incur VAT. Carry out quarterly reviews of foreign VAT using expense management tools that flag claims approaching the annual cut-off date. Antravia tracks deadlines for clients and submits claims early, which prevents the year-end processing bottlenecks that often lead to errors or missed windows.

3. Failing Basic Eligibility Criteria

Why it happens
Eligibility tests are clear but often misunderstood. To qualify, a business must not have a fixed establishment or economic presence in the jurisdiction where the VAT was incurred. Reciprocity rules must be met. The business must not be liable for VAT registration in that country. These are common rejection grounds, especially where companies have warehouses, affiliated entities, or personnel in the UK or EU that may create a fixed establishment.

Example
A Canadian retailer with an EU subsidiary submitted a claim in France under the 13th Directive. The presence of a local EU entity was sufficient for the French authorities to determine an economic presence, leading to a fifteen thousand euro rejection.

How to avoid it
Confirm eligibility at the outset. For the UK, obtain a Certificate of Status equivalent to VAT66A confirming that you are established outside the UK with no local presence. Review whether any activities, personnel, or storage arrangements could be considered a fixed establishment. Antravia’s eligibility scans identify these issues early and advise on the correct filing route.

4. Claiming Non-Business or Non-Deductible Expenses

Why it happens
VAT refunds only apply to business inputs. Personal travel, entertainment, exempt activities, and certain mixed-use costs are not deductible. EU Member States report that non-deductible expenses represent one of the most common rejection categories. The UK specifically excludes entertainment such as meals and client hospitality. The UAE excludes certain hotel and hospitality packages.

Example
A U.S. consultancy included a client dinner as part of a London event claim. HMRC rejected the entire batch of invoices totalling one thousand two hundred pounds because entertainment is not recoverable.

How to avoid it
Review each expense line and confirm that it relates directly to business activities outside the jurisdiction. For mixed-use costs such as car hire, apply the correct business apportionment. For UK claims that involve exempt activities, consider partial exemption rules under Notice 706. Antravia maps claims against deductibility rules before filing to ensure the claim is fully compliant.

5. Insufficient Proof for Goods Exports and Specific Transactions

Why it happens
Goods purchased in the UK, EU, or UAE for export require evidence that the items physically left the country. Missing customs documents, airway bills, or export declarations will lead to rejection. ECJ case law shows consistent patterns of refusal in cases where transactions cannot be verified or where authorities cannot trace goods along the supply chain.

Example
A California manufacturer purchased tools in the UK for export to the United States but failed to retain shipping documents. The refund claim for eight thousand pounds was rejected in full.

How to avoid it
Maintain clear export documentation, including customs declarations such as the UK C88, airway bills, and commercial invoices. Where possible, obtain zero-rating from the supplier at the time of purchase by providing export evidence. For high-value shipments, consider bonded or tracked freight. Antravia reviews all export documentation during the preparation stage to minimise the risk of rejection.

Protect your VAT Recovery

Rejections occur in every jurisdiction, but they are preventable. Across the EU, UK, and UAE, audits from 2024 and 2025 show that between twenty and forty percent of claims fail because of issues that could have been resolved with proper documentation, planning, and early review.

Antravia supports foreign businesses with full pre-submission reviews, eligibility checks, multi-country filing, and structured document verification. Our approach has increased client approval rates to more than ninety percent across 2024 and 2025.

If your business incurs VAT in the UK or internationally, a structured reclaim process can release meaningful cash flow.

Start a VAT Audit with Antravia

Upload sample invoices for an initial assessment or schedule a short consultation with our team.
Last updated: November 2025. Based on HMRC, European Commission, and UAE FTA guidance.

References

1. European Commission. (2019). VAT refunds and reimbursements: A quantitative and qualitative study. https://taxation-customs.ec.europa.eu/system/files/2019-07/20190620_final_report_vat_refunds.pdf

2. HMRC. (2025). Refunds of UK VAT for non-UK businesses (VAT Notice 723A). GOV.UK. https://www.gov.uk/guidance/refunds-of-uk-vat-for-non-uk-businesses-or-eu-vat-for-uk-businesses

3. KPMG. (2025, November 13). EU: CJEU judgments on denial of VAT deduction for nonexistent invoices. https://kpmg.com/us/en/taxnewsflash/news/2025/11/eu-cjeu-vat-deduction-refund-administration-hungary.html

See our specialist pages
Global VAT Reclaim - Recover the Tax you’ve already paid abroad
UK VAT Reclaim for U.S. and Global Businesses
EU VAT Reclaim for U.S. and Global Businesses
UAE VAT Reclaim for U.S. and Global Businesses
International VAT Reclaim

Disclaimer:
Content published by Antravia is provided for informational purposes only and reflects research, industry analysis, and our professional perspective. It does not constitute legal, tax, or accounting advice. Regulations vary by jurisdiction, and individual circumstances differ. Readers should seek advice from a qualified professional before making decisions that could affect their business.
See also our Disclaimer page