VAT

1. Overview

If you sell, supply or transfer goods out of the UK to someone in another country you may need to charge VAT on them. Generally speaking, you can zero-rate supplies exported outside the European Union (EU), or sent to someone who’s registered for VAT in another EU country.

If you sell goods or services to someone in another EU country, who isn’t VAT registered, you charge VAT in the normal way. Sales to another country inside the EU are called ‘dispatches’ or ‘removals’. ‘Exports’ describes sales to a country outside the EU.

2. Sales to someone who is VAT registered in another EU country

If you’re sending goods to someone who is VAT registered in the destination EU country, you can zero-rate the supply for VAT purposes, if:

• the goods are sent out of the UK to another EU country
• whoever you’re sending them to is VAT registered in another EU country
• you get their VAT registration number, including the 2 letter country code, and show it on your sales invoice
• you’ve got ‘evidence of removal’ showing that the goods have gone out of the UK
• you dispatch the goods and get evidence of removal within 3 months

To account for the VAT on zero-rated sales to another EU country, include the value of the goods and services in your VAT Return.

Your ‘evidence of removal’ will include a number of things like:

• customer orders
• correspondence with customers
• sales invoices
• packing lists
• invoices from hauliers
• bank statements
• consignment notes showing the goods have been received in another EU country

and must show:

• your business details
• your customer’s details
• a detailed description of the goods and their value
• the method of transport and route
• where the goods are going to

Evidence must be kept for 6 years. HM Revenue and Customs (HMRC) can ask to see it and if they think it is unsatisfactory you may have to pay VAT on the goods or services sold. If you can’t get this evidence in time you must account for VAT on your return.

You can use an online interactive tool to check if a VAT number for an EU country is valid. To confirm the details you’ve been given by a new customer, you should contact the VAT Helpline.

3. Goods dispatched by post

You can zero-rate goods you send by post to a customer who is VAT registered in another EU country.

You’ll need to use form C&E132, or ask the Post Office for a certificate of posting. If you use Royal Mail Parcel Force, they’ll give you a Dispatch Pack with accounting documents, a customs export declaration and a receipt copy. The Dispatch Pack goes with the goods. For EU sales you don’t need to fill in a customs export declaration form.

4. Dispatch by courier

If you use courier or fast parcel services, you’ll normally be given an airways bill number for each shipment. This is acceptable evidence that the goods have gone abroad. Otherwise, they’ll give you a Customs Dispatch Pack receipt copy.

5. Collection by customer

If your customer arranges to collect the goods from you, you’ll need to be sure how and when the items are leaving the UK, and what evidence of removal they will give you, before you agree not to charge VAT. If you have any doubts, it’s advisable to take a deposit that’s the same as the VAT that would be charged. If they give you the evidence that the goods have left the country within the time limit, you can refund the deposit.

6. Call-off stocks

Call-off stocks are goods that you dispatch from the UK to another EU country, and keep in storage ready for a particular customer in that country. The customer only calls for them (‘call-off’) when the goods are needed, and until this happens, you are still considered the owner of the goods. However, as long as the customer either operates the storage facility where the goods are held, or is at least aware that the goods have been delivered into storage for them, you can treat the goods in the normal way and, assuming that all the usual conditions have been met, zero-rate the supply.

If you are holding call-off stocks for a customer but can’t meet these conditions, you have to treat them as consignment stocks.

7. Consignment stocks

Consignment stocks are goods you dispatch to another EU country where they’re held somewhere before you finally supply them to a customer in that country.

That means that they are treated as supplied in the UK and liable to UK VAT unless you are also registered for VAT in the EU country to which they are sent, in which case they can be zero-rated assuming all the usual conditions are met. You may also have to account for VAT in that country, and so have to be registered there. Contact the tax authority in that country for advice.

Details of contact addresses and other useful information provided by the VAT authorities in other Member States can be found on the European Commission website.

8. Reporting requirements for zero-rated EU sales

All UK registered traders have to send lists of their EU sales to HMRC.

You have to tell HMRC about zero-rated EU sales on 3 different forms:

• your normal VAT Return in box 6 and box 8
• the EC Sales List (ESL)
• the Intrastat Supplementary Declaration, if you sell over £250,000 of goods to other EU customers in a year

HMRC will send you the ESL automatically if you’ve completed box 8 on your VAT Return.

9.Sales in another EU country to someone who isn’t VAT registered

If you supply goods to a customer in another EU country who isn’t registered for VAT in that country, and you are responsible for delivery this is a ‘distance sale’. The most common examples are mail order or internet sales to private individuals in another EU country.

However, if you transfer your own goods to another EU country, whether to another part of your organisation, or simply to put in storage, this is treated as if you had made a supply in the UK and an acquisition in the destination country. You may therefore have to account for UK VAT unless you are also registered for VAT in the EU country to which they are sent, in which case they can be zero-rated assuming all the usual conditions are met. You may also have to account for acquisition VAT in that country, and so have to be registered there.

10. When you need to register for VAT in other EU countries

For distance sales, you must charge VAT at UK rates in the normal way. However, each country has a ‘distance selling threshold’. If the value of your sales to that country exceeds this limit, you must register for VAT in that country, and charge their rate of VAT on sales to that country.

11. How to charge VAT to someone in another EU country

If you sell goods or services to someone who isn’t VAT registered in another EU country, you must charge VAT in the normal way, just as you would for a UK customer. You include the sale in your VAT Return for the period when the tax point takes place. This is just the same as for sales to UK customers.

12. Excise goods

If you supply excise goods (goods on which excise duty is payable, such as alcohol or tobacco) to someone who isn’t registered for VAT in another EU country, the VAT due depends on whether they are delivered by you or collected by your customer.

If you deliver the goods (or arrange for them to be delivered), they are treated as distance sales in the country to which they are delivered, and you’ll have to register for VAT there regardless of the value of the sales. If the customer collects them the supply can be zero-rated, unless they are for private consumption in which case they are liable to UK VAT in the normal way.

13.Reporting requirements for EU sales where VAT is charged

If you’ve made EU sales where you’ve charged VAT, include the value of the sales in box 1 and box 6 on your return, and pay HMRC any VAT you’ve charged in the usual way. You won’t have to report these sales on an ESL.

However, you’ll have to complete an Intrastat Supplementary Declaration if your sales to other EU customers exceed £250,000 of goods in a year.

14.Temporary movements of goods to another EU country

You may have to send goods to another EU country so you can do a job there. These are called ‘temporary movements’. You won’t have to account for VAT on these goods if all of the following apply:

• you don’t have a place of business in the EU country where you’ve sent the goods
• you’ve got a contract to carry out in that country and need the goods for that contract
• you intend returning the goods to the UK when the contract is finished
• you keep evidence that the goods have left the UK and returned
• you keep a register of temporary movements to other EU countrie

15. Installing or assembling goods in another EU country

You might have a contract to supply goods that you’ve got to install or assemble on site. When this happens, your supply takes place in the country where you install or assemble the items. You might have to register for VAT in that country. Some EU countries have a simplified system for this but you’ll need to contact the VAT office in that country for details.

16. Sending goods to another EU country for repair or processing

If you send goods to another EU country for repair or processing, you don’t make a sale - so you don’t need to charge VAT. The EU repairer or processor won’t charge you VAT for their work if you’re registered for VAT in the UK. But you have to operate the ‘reverse charge procedure’ when the goods come back - you charge yourself VAT, and then reclaim it in the normal way. There’s no net effect as far as you’re concerned.

You’ll also have to:

• keep a record of the temporary movement of goods
• fill in the Intrastat Supplementary Declaration for the dispatch and return of the goods

17. VAT on exports to non-EU countries

VAT is a tax on goods used in the EU, so if goods are exported outside the EU, VAT isn’t charged. You can zero-rate the sale, provided you get and keep evidence of the export, and comply with all other laws. You must also make sure the goods are exported, and you must get the evidence, within three months from the time of sale. This can be longer for goods that need processing before export and for thoroughbred racehorses.

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

You mustn’t zero-rate sales if your customer asks for them to be delivered to a UK address. If the customer arranges to collect them from you, an indirect export, you may be able to zero-rate the sale as long as certain zero-rating conditions are met.

18. Goods exported temporarily or sent on sale or return

If you send goods outside the EU temporarily for exhibition, or sell goods on sale or return and they’re returned, then no sale has taken place and you don’t have to pay VAT in the UK when the goods are returned.

19. Goods processed in the EU before they are exported

You might sell goods to a non-EU customer, but first send them to another EU business for processing. You can still zero-rate the sale if:

• the goods are delivered to the EU business, not sold to them
• the EU business doesn’t use the goods - it only processes them for export

In addition, your records must show the following:

• the name and address of the customer
• invoice date and number
• description, quantity and value of goods
• name and address of EU processor
• date by which goods must be exported
• proof of export and date of actual export

If goods have to be processed in the EU after leaving you but before they’re finally exported, the time limit is 6 months.

Many businesses get their freight forwarder, shipping company, airline or other agent to handle the paperwork. There’s more about appointing an export agent in VAT Notice 703.

20. Speeding up and simplifying the export process

The National Export System (NES) allows you to send export documentation to HMRC electronically. This makes exporting your goods quicker and easier.

21. Getting a customs identification number

If you plan to export goods to countries outside the EU you will need to get an Economic Operator Registration and Identification number (EORI) to deal with EU Customs authorities.

Your EORI number is unique and valid throughout the EU. You will need it when you supply information to customs authorities, for example when completing customs declarations.

You will need an EORI number even if you only occasionally export goods outside of the EU.

22.Proof of export

You need documentary evidence of goods leaving the EU to zero-rate your exports. This can be commercial or official evidence. If you don’t get this evidence in time, you’ll have to account for the VAT on your return.

If you use the NES, you’ll automatically get an electronic Goods Departed Message when the goods leave the UK, and this is acceptable official evidence.

In addition to evidence that the goods have physically left the EU, you’ll need to hold supplementary evidence - eg, within your accounting system - to show that a transaction has taken place.

If the evidence is unsatisfactory, then you may have to account for VAT on the sale.

You must keep all the evidence for 6 years and show it to HMRC if they ask to see it.

23. 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. You can do this through the NES.

Other goods need either:

• a bulk NES declaration by the shipping line - supported by individual Consignment Notes and Customs Declarations (CNCD)
• individual NES declarations that you make

24.Exports via other EU countries

If you send goods by road across the EU before they’re finally exported, you’ll need either:

• official proof of export for VAT - either form C88 (SAD) or the NES form endorsed at the customs office of exit from the EU
• commercial transport evidence that the goods left the EU

If you don’t have one of these, you can’t zero-rate the sale.

25. Exports by retailers

You can zero-rate sales of goods for export to private customers if you meet the conditions for commercial exports, or the conditions of the VAT Retail Export Scheme.

26. VAT accounting and record keeping for exports

You’ll need to keep several records for VAT on exports:

• on your VAT Return put your sales into Box 6
• copies of invoices and other sale documents
• your register of temporary movements
• evidence of export