VAT: New guidance on zero rating exports

HMRC has published updated guidance on the evidence required to zero rate the export of goods. VAT Notice 703 sets out the following changes on the documentation which is required for proof of export:

• Para 6.1 – For VAT zero rating purposes a business must produce official evidence or commercial evidence. Both types generally have equal weight but, if the commercial evidence is found to be lacking sufficient detail, a business will be expected to provide official evidence. An exporter must also provide supplementary evidence to show that a transaction has taken place, and that the transaction relates to the goods physically exported. If the evidence of export provided is found to be unsatisfactory, VAT zero rating will not be allowed and the supplier of the goods will be liable to account for the VAT at the appropriate UK rate.

• Para 6.5 – What must be shown on export evidence (extract from the Notice)

“An accurate description of the exported goods and quantities are required, for example ‘2000 mobile phones (Make ABC and Model Number XYZ2000), value £50,000’.

If the evidence is found to be unsatisfactory you as the supplier will become liable for the VAT due.

If you’ve described goods inaccurately on an export declaration you may be liable for a customs penalty.

The rest of this paragraph has force of law.

The evidence you obtain as proof of export, whether official or commercial, or supporting must clearly identify:

• • the supplier
  • the consignor (where different from the supplier)
  • the customer
  • an accurate and full description of the goods including quantities
  • an accurate and consistent value of the good
  • the export destination, and
  • the mode of transport and route of the export movement

Vague descriptions of good, quantities or values are not acceptable. An accurate value must be shown and not excluded or replaced by a lower or higher amount”.

• Paras 7.3 and 7.4 on merchandise in baggage and direct exports of personal goods in accompanied baggage have also be amended.

Overview

It is vitally important that exporters obtain the correct evidence that goods have physically left the UK and that all descriptions of the goods are accurate and satisfy HMRC requirements. There has been a significant amount of case law on export documentation (an example here) which illustrates that this is often an area of dispute.