Article posted by Matt Thomas, for Smarta
17 September 2012

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VAT on exports

Exporting to an EU country to someone who is VAT-registered

  • HMRC refers to exports to countries within the EU as dispatches or removals.
  • You zero-rate VAT on goods exported to VAT-registered people within the EU. (If any VAT is due in the destination country, the recipient pays it there.)

Keeping records if you’re dispatching to someone VAT-registered in their destination country:

  • You have to show their VAT-registration number (including two letter country code) on your sales invoice.
  • Show prices on invoices in the foreign currency and in sterling.
    • You can use the exchange rates in newspapers.
    • Or on the HMRC site.
    • Or you can apply to HMRC in writing to use a different set of rates (but don’t start using them unless you’ve been approved).
  • You have to get the paperwork proving the goods have left the UK, known as ‘evidence of removal’, within three months of the sale.
  • Keep any and all of the following:
    • Customer orders
    • Sales invoices
    • Invoices from the companies who actually did the removal (shipping, couriers, etc)
    • List of what was packed
    • All correspondence with the customer
    • Relevant bank statements
    • Paperwork proving the document arrived in the destination country
  • Documents should show:
    • your business’ name
    • your customer’s name
    • what the goods are
    • how much they’re worth
    • the destination address
    • the method of transport (courier, post, etc)
  • If you send goods by post: fill out a form C&E 132 or get a certificate of posting (or, if you use Royal Mail Parcel Force, you’ll get a pack with all the documents you need).
  • If you send goods by courier: your airways bill number or customer dispatch pack receipt are sufficient as evidence of removal.
  • If a customer is planning on collecting the goods or if the goods are going to be stored in the destination country for some time until the customer is ready to collect them, check out the relevant bits of information on HMRC’s site here.
  • You have to keep all paperwork for six years.

Reporting your exports to HMRC:

  • You must report your EU sales and the VAT charged to HMRC using:
    • Your VAT return ( Boxes 6 and 8 )
    • Your EC Sales List (ESL) – you get sent this automatically after ticking Box 8 of your VAT return (find out more in Resources, below)
    • If you sell more than £260,000 of goods to EU countries in a year, you must also fill out the Intrastat Supplementary Declaration (find out more in Resources, below)

Exporting to an EU country to someone who is not VAT-registered

  • This is called distance selling.
  • You need to charge VAT at the same rates as you would if you were selling in the UK.
  • You follow the same process as if you were selling to someone in the UK, including the VAT on the invoice.
  • Put prices on the invoice in sterling and the foreign currency.
    • You can use the exchange rates in newspapers.
    • Or on the HMRC site.
    • Or you can apply to HMRC in writing to use a different set of rates (but don’t start using them unless you’ve been approved).

You only need to register for VAT in that country if:

  • You exceed a certain threshold of sales in one country (different for each EU country). Find out the threshold from HMRC.
  • You are distance selling goods on which excise duty is due (such as alcohol or tobacco) if you are delivering the goods.
  • If goods on which excise duty is due are for personal use.
  • (If the customer is collecting goods on which excise duty is due, you don’t need to register and you just zero rate them as normal.)

If you have charged VAT on a sale, you need to report it to HMRC by:

  • Including the sale in Box 1 and Box 6 on your VAT return.
  • You do not need to record it on a EC Sales List (ESL).
  • If you have sold more than £260,000 of goods to EU countries in a year, you must fill out the Intrastat Supplementary Declaration (find out more in Resources, below)

Special cases in the EU

If you are:

  • Dispatching goods to another part of your own company
  • Only moving the goods to the destination country temporarily
  • Dispatching and installing or assembling goods at the destination country
  • Sending goods to an EU country for repair or other processing

You need to read about the different procedures and rules involved in the relevant sections on this page of HMRC’s website.

Exporting to countries outside the EU

  • HMRC uses the term ‘exports’ to mean exporting goods to countries outside the EU.
  • As VAT is only a Europe-wide thing, you zero-rate goods going outside the EU.

But you have to make sure you have documentation to prove:

  • The sale happened
  • The shipment happened (if you don’t get this, you’ll have to account for the goods on your VAT return)
  • You also have to make sure the goods leave the EU within, in most cases, three months (some items such as racehorses have longer limits, call HMRC to check).
  • If they’re being transported by road through other EU countries, you need to get documentation proving they have left the EU (or else you can’t zero-rate the sale).

If you are sending goods to the EU to be processed before being sent on outside of the EU, if you are only moving goods outside the EU temporarily, if you are a retailer, or if you are sending goods to the Channel Islands, read HMRC’s advice on the rules for these special cases (at the bottom of the page).

Recording exports to countries outside the EU:

  • Put sales in Box 6 of your VAT return
  • Keep copies of invoices and the documentation listed above proving export

Resources


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Article posted by Matt Thomas, for Smarta
17 September 2012

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