VAT 0% when exporting from the UK - when zero rating can be applied

VAT 0% when exporting from the UK - when zero rating can be applied

Exports of goods from the UK may be covered by the VAT rate 0% (so-called zero rating). However, this does not mean automatic exemption. The application of this rate is only possible if certain conditions are met and there is adequate documentation to support the export.

Below are the most important rules that businesses exporting goods from the UK should know.

 

Why exports may be subject to VAT rate 0%

VAT is a tax on consumption. In practice, this means that it should be charged in the country where the goods are ultimately consumed.

If the goods leave the UK and go to a customer in another country, the sale may be covered by the VAT rate 0%, as the consumption is outside the UK. However, this is conditional on meeting the requirements set out by HMRC.

 

Direct export and indirect export

Export regulations distinguish between two basic models.

Direct export

Direct export occurs when the seller:

• organises the transport of goods outside the UK himself, or
• outsources the transport to a carrier, freight forwarder or agent acting on his behalf.

Indirect export

Indirect exports occur when:

• an overseas customer or its agent receives goods in the UK,
• and then organises their export outside the UK himself.

In this case, the vendor usually has less control over the transport, so documentation requirements may be more stringent.

 

Key conditions for the application of the 0% rate

For a sale to qualify as an export subject to VAT rate 0%, certain conditions must be met.

The most important of these are:

• goods must physically leave the United Kingdom,
• The export must take place within a certain period of time after the sale,
• The exporter must have credible export evidence,
• the documentation must make it possible to trace the goods from sale to export.

If any of these conditions are not met, the sale cannot be covered by the 0% rate.

 

Export deadlines

In most standard cases, the following deadlines apply:

• goods must be exported within 3 months of the sale,
• during the same period obtain evidence of exports.

In certain situations - for example, where goods are processed prior to export - the time limit may be extended to 6 months.

 

What documents prove export

In order to apply VAT rate 0%, the exporter must have documentary evidence that the goods have been exported from the UK.

Official evidence

Official evidence of exports includes:

• export declaration filed in the system Customs Declaration Service (CDS),
• confirmation of export containing the number MRN or DUCR.

Commercial evidence

Alternatively, transport documents may be used, such as:

• CMR in road transport,
• bill of lading in maritime transport,
• air waybill in air transport,
• shipping certificates or other transport documents proving export.

The documents should clearly indicate, among other things:

• exporter and recipient,
• description and quantity of goods,
• value of goods,
• destination country,
• the means of transport and the export route.

 

What happens when there is no export proof

If the exporter does not have the relevant documentation within the required timeframe, the sale cannot be considered as an export.

In this situation:

• VAT should be charged at the standard UK rate,
• An adjustment of the settlement is only possible once evidence of export has been obtained.

Therefore, proper export documentation is crucial not only from a logistical point of view, but also for tax accounting.

 

CDS export declaration system

From 2024, all UK export declarations are handled by the Customs Declaration Service (CDS).

This system replaced the previous system CHIEF and is now the primary platform for submitting export declarations and obtaining proof of export of goods.

 

Support in the export process

Exporting is not just about transporting goods. It is also the proper preparation of customs documentation, export receipts and tax compliance.

If your company exports goods from the UK and needs support with:

• export procedures
• customs documentation
• the organisation of international transport
• cooperation with freight forwarders and customs agents

J.Dauman Logistics team can help you organise your export process correctly.

 

Source:
HM Revenue & Customs - VAT on goods exported from the UK (VAT Notice 703)
https://www.gov.uk/guidance/vat-on-goods-exported-from-the-uk-notice-703