Understanding VAT Export Rules: A Guide for UK Businesses

If your business is involved in exporting goods or services, understanding the VAT rules for exports is essential. Exporting outside the UK can provide exciting growth opportunities, but it also comes with compliance responsibilities. At AWS Accountants, we're here to demystify the rules and ensure your business remains compliant while maximising the benefits of international trade.

What Are VAT Export Rules?

Exports are generally goods or services sold to customers outside the UK. For VAT purposes, exports are treated differently depending on whether the customer is in the EU or outside the EU. With the UK no longer part of the EU, the rules are particularly important for businesses exporting to European customers.

In most cases, goods exported outside the UK can be zero-rated for VAT. This means you do not charge VAT on the sale, but you can still reclaim the VAT on related costs. For services, the VAT treatment depends on the "place of supply," which determines whether VAT applies.

Exporting Goods Outside the UK

Goods exported outside the UK are typically zero-rated for VAT if you meet the following conditions:

• Goods Leave the UK: You must have evidence that the goods have been exported. This might include shipping documents, invoices showing the customer's overseas address, or customs declarations.  Ensure that the buyer is genuinely located outside the UK and not using an intermediary within the UK.
• Keep accurate records to prove the export. HMRC can deny zero-rating if you don't provide sufficient evidence.

Exporting Goods to the EU

Post-Brexit, exports to the EU are treated as exports to any other non-UK country. Zero-rating applies if the goods are exported from the UK and you meet the documentation requirements. However, businesses may also need to consider additional customs formalities, including the need for an Economic Operator Registration and Identification (EORI) number.

Exporting Services

The VAT treatment of services depends on the nature of the service and the location of the customer. The general rule for B2B (business-to-business) transactions is that the service is supplied where the customer belongs, making it outside the scope of UK VAT for overseas customers. For B2C (business-to-consumer) services, the place of supply is often where the supplier is located.

However, there are exceptions, including services related to land, transportation, and electronically supplied services, which have their own rules.

Common Pitfalls to Avoid

• Insufficient Documentation: Without clear proof of export, you risk being unable to zero-rate your goods or services.
• Incorrect Classification: Misclassifying a sale as an export or failing to identify where the place of supply is for services can lead to VAT errors.
• Customs Declarations: Post-Brexit, you must ensure that customs declarations are completed accurately for goods leaving the UK.

How AWS Accountants Can Help

Navigating VAT export rules can be complex, especially when dealing with different jurisdictions and changing regulations. At AWS Accountants, we provide expert guidance to help your business comply with VAT rules, maintain accurate records, and reclaim VAT where possible.

Whether you're new to exporting or want to streamline your VAT processes, we're here to support you.