If you are planning to export goods out of the UK, you will already be familiar with the fact that many of the Value Added Tax (VAT) rules have changed since Brexit. For example, exporting to other European Union (EU) countries is generally considered as exporting to any other country outside the UK. However, there are differences in terms of what VAT you may be required to pay on exports – whether to the EU or other countries – depending on several factors. In this article, we explore some of the duties and customs procedures for exporting goods and the tax and duty rates you may be required to pay for exporting goods. Let’s take a closer look.
What is the general rule of thumb?
Exports from the UK to other countries are usually zero-rated. However, there are exceptions to this rule and the best step to take in this scenario is to firstly check what types of goods you are planning on exporting, checking their appropriate VAT rate and if one applies to them and then confirm this with a professional in the bookkeeping and accounting service provider or HMRC.
Also important to note is that you need to be 100% clear about the paperwork you’ll need to prepare and also ensure that you declare that your goods are for export. Your customers must also receive the relevant documentation for importing the goods into their own country. However, this is where the situation can become a bit complicated. For example, you need to know whether your customer is registered for VAT in their country or if they are not registered for VAT because this will affect how much and whether VAT payments are required at all.
We explore each scenario in more detail below.
Exporting to VAT-registered customers in the EU
In this scenario, you will need your customer’s VAT number to zero-rate the sale so that no VAT for exports needs to be added. For this purpose, it is necessary that you keep the proof that the goods have left the UK in addition to the VAT invoice you have issued. When you submit your VAT returns, you need to be able to provide details of each VAT-registered customer and the value of the goods supplied. This is done on a separate EC Sales List.
Exporting to non-VAT-registered customers in the EU
However, if your customer is not VAT-registered, you will need to charge export VAT at the normal VAT rate. You will be required to issue a VAT invoice which contains the details of the VAT charged. Although you don’t need to complete a separate EC Sales List, as mentioned above, the value of your sales will be included in the Intrastat returns that are generally required from larger exporters.
An exception to the rule
An exception to the rule above for non-VAT-registered customers in EU countries. This happens if the total value of your sales to these customers during one calendar year is more than that country’s VAT distance selling threshold. Typically, these are in the region of €35,000. If you find yourself in this situation, you will need to register for VAT in that country and charge the local VAT rate as opposed to charging UK export VAT.
The bottom line
Navigating the world of export VAT comes with several exceptions to the rule. You are also required by law to retain all documentation that is related to your exports. In addition to this, you will need to submit regular VAT returns to ensure that you operate within the confines of the law. If all this seems quite daunting, you need expert tax accountants in London.
At Tax Navigator, we pride ourselves on our expert service and advice to export businesses and many others through our outsourced bookkeeping services in London. If you require any assistance regarding export VAT, its calculations or even the submission of your VAT returns, don’t hesitate to get in touch with us. We are at your service and ready to assist.