VAT notice 703 outlines the VAT treatment of taxable supplies exported out of the UK to non-UK destinations. This is VAT notices is important to businesses that export or intend to export goods outside the UK. Hauliers, warehouse keepers, shipping companies and customs clearing agents also need to be aware of this legislation.
What aspects do you need to know?
Goods that you export outside the UK are known as a direct export. To zero rate the supply of these taxable supplies you need to retain export evidence that proves that these goods have left the UK. Where your customer arranges delivery themselves of your goods this is known as an indirect export. The export evidence requirements for an indirect export are substantially greater than a direct export. Further to this, since it was the customer who has arranged the delivery of the goods, they must collect this evidence for you.
What are the consequences of not having the export evidence for an indirect export?
In the event you are unable to provide the export evidence required for a direct or indirect export you are not able to zero-rate this supply and VAT must be charged at the applicable rate. This will either mean you must issue a VAT invoice to your customer, or the total price paid by the customer will be the VAT inclusive price (i.e. you suffer the VAT on the sale).
With an indirect export the export evidence requirements are onerous, and this evidence is provided by the customer rather than by yourself. Therefore, there is a significant risk that you will not be able to obtain the export evidence required by HMRC and you could suffer the VAT on this supply.
What should you do?
There are several methods to help mitigate VAT risk that indirect exports represent. It is also essential you are aware of the specific export evidence requirements needed for both direct and indirect exports. If you would like more information on how to mitigate your risk please contact Sam Rose who will be able to assist you further.