Exporting is a big part of many British businesses. If you decide to extend your business’s reach or have re-started exporting, you’ll need to brush up on export laws. In this article, we look specifically at how VAT works when exporting goods or services to customers around the world, including to EU countries.
For the latest rules, it is best to check the official Government website regularly and the dedicated page to VAT on exports.
What's the impact of Brexit on VAT rules?
The UK left the European Union on 31 January 2020 and after the end of the Transition Period, left the EU’s Single Market and Customs Union on 31 December 2020. This means that exports to the 27 EU member states are treated like those to non-EU countries, which means that they should be what is known as "zero rated" for VAT.*
*Under the terms of the Withdrawal Agreement, Northern Ireland – unlike the rest of the UK – remains fully aligned with the EU’s VAT rules on goods, despite Brexit. So, what follows applies to most (**) exports from England, Scotland and Wales, and to exports from Northern Ireland to non-EU destinations. Sales of goods between Northern Ireland and the EU are covered in Notice 725 Single Market.
In anticipation of Brexit (and ongoing post-Brexit), some British companies have set up new subsidiary companies or hubs in the EU’s 27 member states, to minimise extra paperwork and disruption they expect to face. How VAT would operate for those subsidiaries would depend on how they are structured or registered. UK Government guidance says that goods are normally treated as being supplied where they are located at the time of supply and not where the supplier is located.
VAT export charges
In general, a UK business would not charge VAT if goods are exported from:
- Great Britain to a destination outside the UK
- Northern Ireland to a destination outside the UK and EU
This means that you can apply a 0% VAT rate – also known as "zero rating".
But you do still need to include the exports as part of your VAT accounting. Specifically, you will need to get and keep evidence of the export, which can be what the UK Government describes as "official" evidence or commercial evidence.
Managing export documentation
The National Export System (NES) allows you to send export documentation to HM Revenue & Customs electronically. This should make exporting goods quicker and easier. 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 goods have physically left, you’ll need to hold supplementary evidence, for example within your accounting system, to show that a transaction has taken place. You need to keep evidence for six years (and HMRC can ask to see it). Frank Haskew, Head of Tax, ICAEW says “The most important thing for businesses is to have the necessary documentation and evidence to support the zero-rating of exports. Guidance on the documentation needed is available from HMRC’s website.”
If you are exporting goods, you must get an Economic Operator Registration and Identification number (EORI). If you are VAT registered, you should already have an EORI number. If you are unsure if you have an EORI number you can make an online enquiry.
Exports from Northern Ireland via EU countries
If you send goods by road from Northern Ireland across the EU before they’re further exported, you will need either:
- Official proof of export for VAT, either what is known as form C88 (Single Administrative Document - 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 do not have one of these, you cannot zero rate the sale.
VAT accounting and record-keeping for exports
As described earlier, you do need to keep records for VAT on exports: for example, copies of invoices and other sale documents; and evidence of export. You should put your sales into Box 6 on your VAT return.
For more information on how other businesses are managing their trading within the EU after Brexit, read our article here . And, use our Brexit transition check list on supply chains and customs to keep up to date with the latest rules.
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