What satisfies HMRC “Evidence of the export”?
It’s well known that VAT is only applied to sales within the EU, and for any goods exported outside the EU, VAT isn’t charged. HMRC say that you can zero-rate the sale, provided you get and keep evidence of the export.
Today Tamebay reader Bernard today asks exactly what evidence he should be keeping. Here’s his situation and VAT questions:
I’d like to grow my international sales but my international shipping costs are high. I realised recently that Vat on exports (outside EU) can be zero rated (effectively subsidising lower shipping charges) according to HMRC and here. Yehay, this seems like a bonanza!
However, on researching I read evidence is required to verify exports – I suppose for a VAT audit. The HMRC information is quite lengthy and uses language of systems I’m not familiar with. I rang the VAT helpline and the person I contacted was helpful although inexperienced helping online sellers (familiar story) confirmed the evidence of dispatch of goods (order and dispatch documents) would be key requirements and recommended printing as a six year record would be needed.
I wonder what how other resellers handle this and how HMRC treats ecommerce sellers in practice. Is it sufficient to reference my digital orders in my sales order management software system and PayPal (or similar) payments as evidence? Or do I also need proof of dispatch such as my digital courier shipping documents or Royal Mail customs documents? Would this rule out small packets sent by standard mail with no tracking?
NB Whilst we know Tamebay readers have a wealth of information, if you are unsure about record keeping we’d advise taking the best advice and then phone HMRC to check your proposals are sufficient. Make a record of the call and the person you spoke just in case of queries down the line.
I’ve worked in import/export for 30 years for various commercial companies and these days Customs compliance is a big part of my job. I can tell you from experience that evidence of export will mean courier air waybills and similar documents. As I don’t deal commercially with postal exports I can only guess at the answer for standard mail with no tracking, can you get the post office to stamp a certificate of shipment? I don’t know if it would be enough but I would think that they would need at least this much as well as your commercial documents detail what goods were sent etc.
So to confirm, all items posted outside the EU should be zero rated?
I thought this was only the case if posting to another business with a vat number and not when posting to a domestic address for a personal sale?
Steve, Just to help explain this for you.
With in the EU business to business transactions are zero rated, so if a business from outside the UK but with EU buys from you and provides their VAT number no VAT is charged.
Outside the EU no VAT is paid on sales to HMRC providing you keep proof of the order, so a copy of the actual order with customers details and a copy of relevant shipping notices.
it astonishes us that some one can have the wit to run a business good enough to reach the vat threshold
yet not be aware of a very basic feature of the vat scheme
This answer from HMRC is somewhat concerning. When I registered for VAT, they sent out someone from the local VAT office to check how I was doing things, and I went through simply downloading the data from ebay and then recording it in my accounting package, including zero rating shipments outside the EU. I explained I kept shipping records for 6 months only.
This was totally acceptable to him then, and I wasn’t asked to make any change to what I was doing, so it would be a big concern now if this wasn’t sufficient, because I can’t recreate shipping records that have been disposed of. His only requirement is that I should keep my sales records for 7 years, which I do.
I don’t think you need to worry. If you’ve been inspected, and provided the rules haven’t changed (and they haven’t) then you’ll be be fine as they’ll have signed off to say that all is in order, and you’ll be safe until or unless they advise otherwise. I believe they do have a degree of discretion in these things, so the same may not be true of all business, but generally if you can show that your taking care with your records, paying promptly and acting honestly and in good faith you’ll be fine. It’s business that are clearly disorganised or trying to minimise payments that may have additional requirements imposed.