Selling, delivering, or transporting goods outside the UK may imply a zero rate, if you export outside the EU or sell goods to customers who are VAT payers in the EU.

If you sell goods to those who are not VAT payers, then a tax will be charged.

Selling to customers who are VAT payers in an EU country

The zero VAT rate applies if:

  • goods are shipped from the UK to an EU country;
  • the client to whom you are sending the goods is a VAT payer in the EU country;
  • you are provided with the client's VAT identification number included in the invoice;
  • you have a “confirmation of movement” indicating that the goods have left the UK;
  • you send the goods and receive a confirmation of movement within 3 months.


Mail Items

You can apply a zero VAT rate on goods sent by mail to a client who is a VAT payer in an EU country. If you use the services of the Royal Mail Parcel Force courier service, they will provide accounting documents, an export customs declaration and a copy of the receipt.

Pickup

If the customer chooses pickup as a delivery method, then you must decide how and when will the goods leave the UK. If in doubt, you should take a deposit in the estimated amount of VAT. You can return the deposit if you receive evidence that the goods left the country on time.

Temporary storage

They are used when goods are shipped from the UK to an EU country and stored there, ready to be shipped to a specific customer. The customer orders the goods when the need arises. Until that time, you are still considered the owner of the goods. If you store goods for a client in such places without fulfilling all the conditions, they are considered consignment goods.

Consignment Warehouse

They are used when shipping goods to an EU country. They are stored there until being delivered to the customer. Consignment goods imply VAT, unless you are a VAT payer in the EU destination country. In this case, you can apply a zero rate of VAT.

All UK-registered merchants must send their EU sales lists to Her Majesty's Tax and Customs Board.

You can report on zero-rate sales in the EU using 3 different forms:

  • ordinary VAT declaration, paragraphs 6 and 8;
  • consolidated declaration;
  • EU statistical declaration, if you sell +250 000 pound goods/year  in the EU.


Sale in the EU to a customer who is not a VAT payer

This is called a “remote sale”. The most common examples are mail ordering or online sales to individuals in an EU country. If you transport your own goods to the EU, such operations are considered the same as when you made a purchase. You may need to report on UK VAT, unless you are a VAT payer in the EU country where the goods are sent. In this case, you can apply a zero rate of VAT.

When to register as a VAT payer in EU countries

In each country there are "limits on distance trading". If the cost of your sales exceeds the limit, you must register as a VAT payer and levy VAT on sales at the established rate.

How to collect VAT from a customer in an EU country

If you sell goods or services to a customer who is not a VAT payer in an EU country, you must charge VAT as with customers in the UK.

Temporary movement of goods to an EU country

You can send goods to an EU country to perform some work there. Such actions are called "temporary movement". These products should not be included in the VAT return if:

  • You do not have a place of business in the EU country where the goods were sent;
  • You have a contract in that country, and the goods are going to fulfill its conditions;
  • You intend to return the goods to the UK after the completion of the contract;
  • You have evidence that the goods left the UK and then returned back;
  • You keep a register of temporary movements in EU countries.


Sending goods to the EU country for repair or processing / rework

You do not sell these goods, which means that VAT is not charged. Still, you will need to go through the "VAT withholding procedure at the source of payment" upon returning the goods. 

VAT on exports to non-EU countries

VAT is a tax on goods used in the UK and the EU, so if goods are exported outside these countries, no VAT will be charged. Remember to save the export confirmation.

Goods processed / modified in the EU before export

You can sell goods to a non-EU customer, when first sending them to a company in the EU for processing / refinement. You can still apply a zero VAT rate if:

  • goods are delivered to a company in the EU, but not sold;
  • a company in the EU does not use goods, but only processes / finalizes them for export.


Export confirmation

You need documentary evidence that goods left the UK and the EU in order to apply the zero export VAT rate. These can be commercial or official confirmations. If you can’t receive the confirmation on time, you must report VAT in the tax return.

We hope that this exhaustive UK VAT instruction has answered all your questions on this quite complicated subject!