Most people will have heard of VAT - To the high street shopper VAT is included in the purchase price, and often not thought about. 

To business VAT is most likely to be profit neutral but is an important area of activity. Failure to account for it in the correct way can lead to serious issues and penalties. This includes VAT on international sales and purchases.

Despite its importance, International VAT remains one of the least understood taxes.

What is VAT?
Value-added tax (VAT) is a consumption tax on goods and services that is levied at each stage of the supply chain where ‘value is added’. This includes from the beginning to the end of a production process – everything from buying components, transport, assembly, provisions, packaging, insurance and shipping to the final consumer.

What countries use VAT?
As of 2020, its estimated 170 countries and territories in the world have implemented a VAT regime, including the EU. Although VAT is charged throughout the EU, each EU country is responsible for setting its own rates. 

Exporting and Importing

The VAT implications of supplying goods or services to overseas customers or receiving supplies from overseas suppliers are often not understood, and failure to account for VAT properly or follow the correct procedures could lead to penalties.

The common mistakes businesses make are - 

•    failing to register for VAT in other countries when they are been obliged to do so; 
•    not accounting for VAT in the UK on purchases; 
•    or wrongly assumed that a sale to an overseas customer qualifies for zero-rated tax. 

Exporting
If you sell, send or transfer goods out of the UK you do not normally need to charge VAT on them. You can zero rate most exports from Great Britain to any destination outside of it as long as you get and keep evidence of the export, and comply with all other conditions. 

You’ll need to keep several records for VAT on exports:

•    copies of invoices and other sale documents
•    your register of temporary movements
•    evidence of export

You are unable to zero rate sales if your customer asks you deliver them to a UK address. If the customer arranges to collect them from you (an indirect export), you may be able to zero rate the sale as long as you meet certain conditions. 

Importing 
If you import goods into Great Britain from outside the UK you may have to pay import VAT on goods. These are normally charged at the same rate as if they had been supplied in the UK. 

If you’re a UK trader and not registered for UK VAT you still have to pay the import VAT, but you will not be able to reclaim it.

The value for VAT of imported goods is their customs value, determined by the rules in Notice 252, as well as:

•    incidental expenses – such as commission, packing, transport and insurance costs incurred up to the goods’ first destination in the UK
•    any Customs Duty or levy payable on importation into the UK
•    any Excise Duty or other charges payable on importation into the UK – except the VAT itself

To help business get a better understanding Essex Chambers have a Great Britain to the EU - VAT implications workshop on the subject -

Join for this half day virtual workshop, where we will cover:

•    Exporting goods from Great Britain: 

o    When exports can be zero-rated
o    How to avoid HMRC challenges 
o    Issues to consider when importing the exported goods into the EU.

•    Importing goods into Great Britain:

o    The process of importing goods
o    Liability to import VAT
o    How import VAT is paid and when it can be recovered.

•    Northern Ireland: 

o    Movement of goods between NI and the EU and NI and Great Britain
o    An update on the implementation of the Windsor Framework.

 
Date:   Friday 8th December 2023 9.30am to 12.30pm 
Virtual: Zoom Platform
Cost to attend: Members £250.00 + VAT and Non-Members £330.00 + VAT