VAT on Exports and Goods Sold Abroad

Introduction

If you sell goods to customers outside the UK, you can usually zero-rate those sales for VAT — meaning you charge 0% VAT instead of the standard rate. However, to apply zero-rating, you must obtain and keep the right evidence that the goods have actually left the country, and you must meet strict conditions and time limits set by HMRC.

When you can zero-rate exports

VAT is a tax on goods used in the UK. When goods are exported and consumed outside the UK, you don't normally charge VAT on them.

You can zero-rate most exports from:

• Great Britain (England, Scotland and Wales) to any destination outside the UK
• Northern Ireland to a destination outside both the UK and the EU

Note that the Isle of Man is treated as part of Great Britain for VAT purposes, so goods sent there are domestic supplies. The Channel Islands are not part of the UK for VAT purposes, so supplies to Jersey, Guernsey, Alderney or Sark count as exports and can be zero-rated if you meet the conditions.

The 3-month evidence rule

To zero-rate an export, you must get and keep proof that the goods have left the country within 3 months from the time of sale.

The "time of sale" is the earlier of:

• The day you send the goods to your customer
• The day you receive full payment for them

If you don't obtain the required evidence within this time limit, you must charge and account for VAT on your VAT return. The time limit can be longer for goods that need processing before export (6 months) and for thoroughbred racehorses.

Direct exports: when you arrange the transport

A direct export is when you, the supplier, send the goods and arrange the transport yourself (or appoint a freight agent to do so on your behalf).

Goods sent by post

You can zero-rate goods you send by post to an address outside the UK, unless you're sending them from Northern Ireland to an EU country.

You'll need to use form 'Certificate of posting goods form C132' or ask the Post Office for a certificate of posting. If you use Royal Mail Parcelforce, they'll provide a dispatch pack with accounting documents, a customs export declaration and a receipt copy.

Goods sent by courier

If you use courier or fast parcel services, you'll normally receive an airways bill number for each shipment. This is acceptable evidence that the goods have gone abroad. Otherwise, the courier will give you a customs dispatch pack receipt copy.

Indirect exports: when your customer arranges collection

An indirect export happens when an overseas customer (or their agent) collects the goods from you in the UK and arranges the export themselves.

Before you agree to zero-rate the sale, you must be sure how and when the items are leaving the UK, and what evidence of removal the customer will provide. If you have any doubts, you should take a deposit equal to the VAT that would be charged. You can refund this deposit if the customer provides the required evidence that the goods have left the country within the time limit.

You must not zero-rate sales if your customer asks you to deliver goods to a UK address, even if they claim they will export them later.

Evidence you need to keep

To zero-rate your exports, you need documentary evidence that goods have physically left either:

• The UK from Great Britain
• The UK and EU from Northern Ireland

This can be commercial or official evidence.

Official evidence

If you use the National Export System (NES), you'll automatically receive an electronic Goods Departed Message when the goods leave the UK. This is acceptable official evidence and makes exporting quicker and easier.

Additional records

In addition to proof that goods have physically left, you must keep supplementary evidence in your accounting system to show that a transaction took place. This includes:

• Copies of invoices and other sale documents
• The name and address of the customer
• Invoice date and number
• Description, quantity and value of goods
• Date of actual export

You must keep all evidence for 6 years. HMRC can ask to see it, and if they consider it unsatisfactory, you may have to pay the VAT on the goods you sold.

Temporary exports and sale or return goods

No sale has taken place when you send goods outside the UK temporarily for exhibition, or when you send goods on sale or return and they're returned to you. You don't have to pay VAT in the UK when these goods come back, provided you're exporting from Great Britain to anywhere outside the UK, or from Northern Ireland to anywhere outside the UK and EU.

Getting an EORI number

If you plan to export goods, you must obtain an Economic Operator Registration and Identification (EORI) number. This is a customs identification number required for export declarations.

VAT accounting for exports

On your VAT return, you should enter the value of your export sales in Box 6. This is the box for zero-rated supplies.

Keep your register of temporary movements and all evidence of export alongside your other VAT records.

Appointing an export agent

You can appoint a freight forwarder, shipping company, airline or other agent to handle export transactions and produce customs export declarations on your behalf. However, the responsibility to ensure all the rules are followed remains with you, even when using an agent.

Your agent should:

• Take reasonable steps to ensure the goods are as described
• Complete necessary customs formalities
• Ensure goods are exported within the required time limits
• Keep records of each export transaction
• Obtain valid evidence of export and send it to you once the goods have been exported

Special cases

Exports to the Channel Islands

Excise goods or goods subject to customs control exported to the Channel Islands need a Single Administrative Document (SAD) declaration on form C88, which you can submit through the National Export System.

Other goods need either a bulk National Export System declaration by the shipping line (supported by individual Consignment Notes and Customs Declarations), or individual National Export System declarations that you make.

Goods from Northern Ireland processed in the EU before export

If you sell goods from Northern Ireland to a non-EU customer but first send them to an EU business for processing, you can still zero-rate the sale provided:

• The goods are delivered to the EU business, not sold to them
• The EU business only processes them for export, without using them
• You keep detailed records showing the processor's details and proof of final export
• The goods are exported within 6 months

Sources

• Exports, sending goods abroad and charging VAT
• VAT on goods exported from the UK (VAT Notice 703)

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.