1.1 Information in this notice
This notice explains the conditions for zero rating VAT on an export of goods, that is, when the goods leave the UK. It also provides guidance on what you should do when you export goods in specific circumstances. For information about services performed on goods for export see Place of supply of services (VAT Notice 741A).
1.2 Changes to this notice
This notice has been updated to reflect changes to the VAT treatment of supplies of goods and services following the UK’s departure from the European Union and the end of the transition period.
1.3 Who should read this notice
You should read this notice if you are a VAT-registered person and you intend to export goods or if you are involved in the exportation of goods as a customs clearing agent, freight forwarder, haulier, warehousekeeper, shipping company or airline.
1.4 The UK law relating to exports
The principal UK VAT law relating to the zero rating of exports of goods for VAT purposes can be found in:
- section 30(6) of the VAT Act 1994 for direct exports and ‘stores’
- section 30(7) of the VAT Act 1994 for exceptions to ‘stores’
- section 30(8) of the VAT Act 1994 and Regulations 129 and 133B of the VAT Regulations (Statutory Instrument 1995/2518) for indirect exports
- section 30(10) of the VAT Act 1994 for circumstances where the conditions for zero rating are not met
Extra Statutory Concession (section 8 of this Notice) exist to allow relief from taxation in specific circumstances.
1.5 Legal status of this notice
Under the UK VAT law, HMRC may specify conditions to prevent evasion, avoidance or abuse. This notice lays down the conditions, which must be met in full, for exported goods to be zero-rated. Plain English has been used wherever possible but as these conditions have legal status, some legal wording has been necessary.
Some or all of paragraphs 1.6, 3.3, 3.5, 3.6, 4.11, 4.13, 6.5, 6.10, 10.4 and 10.7 have force of law.
1.6 Scope of this notice
This paragraph has force of law.
This notice does not apply to exports covered by:
- freight containers (Notice 703/1)
- sailaway boats (Notice 703/2)
- personal exports of vehicles (Notice 707)
- Retail Export Scheme (Notice 704) (Northern Ireland only)
Except to the extent stated in those notices.
2. The basics
2.1 Zero rating on exports
VAT is a tax levied on goods and services consumed in the UK. When goods are exported they are ‘consumed’ outside the UK and to impose VAT on such goods would be contrary to the purpose of the tax. Therefore, the supply of exported goods is zero-rated provided the conditions in this notice are met.
A zero-rated VAT supply is one which is subject to VAT but where the VAT is at 0%.
2.2 Place of supply
Goods are normally treated as being supplied where they are located at the time of supply and not where the supplier is located.
- outside the UK are not exports and the supply is outside the scope of UK VAT
- in Northern Ireland that are sent to an EU destination should follow the rules for VAT on movements of goods between Northern Ireland and the EU
- in Great Britain that are sent to an EU destination should follow the export rules in this Notice
2.3 The ‘exporter’ for VAT zero rating purposes
The exporter is the person who, for VAT purposes either:
- supplies or owns goods and exports or arranges for them to be exported to a destination outside the UK or EU
- supplies goods to an overseas person, who arranges for the goods to be exported to a destination outside the UK or EU
Special rules exist if an export is preceded by multiple transactions (see paragraph 4.1).
2.4 Overseas person
An ‘overseas person’ is:
- a business person or company who is not resident in the UK
- a business that has no business establishment in the UK from which taxable supplies are made
- an overseas authority
2.5 Appointing someone to handle your export transactions
You can appoint a freight forwarder, shipping company, airline or other person to handle export transactions and produce the necessary customs export declarations on your behalf. At all times the responsibility to ensure rules set out in this notice are followed lies with the supplier even if they you employ an agent.
Information on customs procedures is contained in Notice 275: customs export procedures.
2.6 Agent obligations
The freight forwarder, shipping company, airline or other person appointed by you, the exporter, or your overseas customer should:
- take reasonable steps to make sure that the goods are as described by the exporter
- make sure that the necessary pre- or post-shipment customs formalities are completed
- make sure that the goods are exported within the time limits specified by the exporter
- keep records of each export transaction
- obtain or provide valid evidence of export (see sections 6 and 7) and send it to the exporter once the goods have been exported
2.7 Countries that are part of the UK for VAT purposes
The UK consists of England, Scotland, Wales, Northern Ireland and the waters within 12 nautical miles of their coastlines. Although the Isle of Man has its own VAT authority, for VAT purposes references to Great Britain includes Isle of Man and goods sent to the Isle of Man from Great Britain are treated as domestic supplies for VAT purposes. Different rules apply for supplies from Northern Ireland to Great Britain and the Isle of Man.
The Channel Islands are not part of the UK for fiscal (VAT) purposes. Supplies of goods sent to the Channel Islands are regarded as exports for VAT purposes and may be zero-rated if the conditions set out in paragraph 3.3 or 3.4 are met. See paragraph 7.12 for information about evidence of export of goods to the Channel Islands.
2.8 Direct exports
For VAT purposes a direct export occurs when you, the supplier, send goods to a destination outside the UK, and you are responsible either for arranging the transport yourself or appointing a freight agent. The goods may be exported by any of the following means:
- in your baggage
- in your own transport
- by rail, post or courier service
- by a shipping line, airline or freight forwarder employed by you and not by your customer
2.9 Indirect exports
An indirect export occurs when your overseas customer (as defined in paragraph 2.4) or their agent collects or arranges for the collection of the commercial goods from you the supplier within the UK and then takes them outside the of the UK. This includes goods collected ex-works (see paragraph 6.6 for further information).
Commercial goods means goods which are exported for a commercial purpose by a business customer and not goods intended for the personal use of the customer.
If your customer does not have a business establishment in the UK the supply is eligible for zero rating as an indirect export even if that customer is VAT registered in the UK.
2.10 If you supply goods to an overseas customer who is also established in the UK
Where goods are supplied to a customer established in the UK your supply cannot be zero-rated; but subsequent removal by the customer may be treated as the export of own goods – paragraph 2.15.
2.11 The time of supply of exported goods
The time of supply determines when a supply of goods or services is treated as taking place. This is called the tax point. In most cases the time of supply will be the earlier of either the date you:
- send the goods to your customer or your customer takes them away
- receive full payment for the goods
Notice 700, section 14 explains tax points in more detail.
For the treatment of deposits and progress payments see paragraph 11.5.
2.12 Exports where there is no taxable supply
You need not account for VAT if you:
- supply and export goods which you are to install outside the UK for your customer (the supply takes place in the country where the goods are installed)
- export goods temporarily for exhibition or processing
- export goods on sale or return, where the goods remain your property until they are sold
However, you must still hold valid proof of export (see sections 6 and 7) to demonstrate to us how you disposed of the goods. You must also make an import declaration for any goods returned to the UK.
2.13 Transfer your business’ own goods
When transferring goods from your UK business to your branch outside the UK you need proof of export as evidence that you have transferred your goods.
Transfer of goods from your UK business to a branch outside the UK is not a supply but you must make an import declaration for any goods returned to the UK and retain the details. You can deduct any related input tax subject to the normal rules but do not include the value of any transferred goods as an output in box 6 of your VAT Return.
2.14 Goods accidentally lost, destroyed or stolen before export
You must account for VAT on goods destined for export which have been accidentally lost, destroyed or stolen in the UK as follows:
- before you supplied them – no VAT is due
- you supplied them for direct export – no VAT is due provided that evidence of loss, destruction or theft is held, for example an insurance claim, police investigation and so on
- you supplied them for indirect export – VAT is due at the appropriate rate if the goods have been delivered to or collected by the overseas person, or their agent, in the UK
3. Conditions and time limits for zero rating
3.1 Conditions you need to meet
You must meet certain conditions before you can zero rate supplies of goods for export. These conditions cover the:
- evidence (either official or commercial) you must hold to prove entitlement to zero rating
- time limits in which the goods must be physically exported from the UK
- time limits in which you must obtain evidence of export to support zero rating
Only exports that comply with these conditions are eligible for zero rating.
3.2 The purpose of the conditions
The conditions set out in regulations and this notice are necessary to make sure only genuine exports are zero-rated whilst keeping VAT export procedures as simple as possible.
3.3 Conditions for zero rating direct exports
This paragraph has the force of law.
A supply of goods sent to a destination outside the UK is liable to the zero rate as a direct export where:
- the goods are exported from the UK within the specified time limits (see paragraph 3.5)
- get official or commercial evidence of export as appropriate (see paragraphs 6.2 and 6.3) within the specified time limits
- keep supplementary evidence of the export transaction (see paragraph 6.4)
3.4 Conditions for zero rating indirect exports
You must not zero rate an indirect export where the goods are either:
- supplied to a visitor for their personal (non-commercial) use
- supplied to a private individual who is resident in the UK
- supplied to a customer that has a place of business in the UK from which taxable supplies are made
- delivered to, or collected by, a UK customer at a UK address
If your export transactions do not fit specifically into any of these categories or those listed in sections 3 and 4 contact VAT: general enquiries for advice prior to export, obtaining a written decision, if necessary.
A supply of goods to an overseas customer (see paragraph 2.4) sent to a destination outside the UK is liable to the zero rate as an indirect export where:
- overseas customer exports the goods from the UK within the specified time limits (see paragraph 3.5)
- obtains and gives you valid official or commercial evidence of export as appropriate (see paragraphs 6.2 and 6.3) within the specified time limits
- keep supplementary evidence of export transactions (see paragraph 6.4)
- comply with the law and the conditions of this notice
and the goods are not used between the time of leaving your premises and export, except where specifically authorised elsewhere in this notice or any other VAT notice.
3.5 Time limits for exporting the goods and obtaining evidence
You must export the goods and get valid evidence of export within the time limits shown in the table. In all cases the time limits are triggered by the time of supply (see paragraph 2.11).
If you have not exported the goods within the time limits, or do not hold the necessary evidence to show that the goods have been physically exported, you must not zero rate the supply and must account for VAT at the appropriate UK rate (see paragraphs 11.2 and 11.3).
The following table has the force of law.
|Type of export||Time limit for exporting goods||Time limit for obtaining evidence|
|Direct (under the control of the supplier) and indirect (ex-works) exports (see paragraphs 3.3 and 3.4)||3 months||3 months|
|Supplies of goods involved in groupage or consolidation prior to export (see paragraph 7.4)||3 months||3 months|
|Exports through auctioneers (see paragraph 7.9)||3 months||3 months|
|Goods delivered to the Foreign, Commonwealth and development Office (FCDO) and FCDO Services (FCDOS) for export through diplomatic channels (see paragraph 7.11)||3 months||3 months|
|Goods ordered by a responsible person of an installation situated outside UK territorial waters (see paragraph 4.8)||3 months||3 months|
|Goods ordered by the Ministry of Defence and other Government Departments provided they are directly exported (see paragraphs 4.10 and 4.12)||3 months||3 months|
|Goods to be delivered to overseas authorities provided they are ordered through their embassies, High Commissions or UK purchasing agents (see paragraph 4.13)||3 months||3 months|
|Supplies of goods involved in processing or incorporation prior to export (see paragraph 3.6).||6 months||6 months|
|Thoroughbred racehorses (subject to conditions to be found in Administrative agreements with trade bodies (VAT Notice 700/57). This notice also sets the conditions for extending the time limits to 12 months.||6 months||6 months|
3.6 Conditions for zero rating goods for export after processing or incorporation
Your records must be able to show that the goods you supplied have been processed or incorporated into the goods exported.
Where such supplies are made, an extension to the normal time limits for exporting the goods and getting satisfactory evidence of export is allowed – see paragraph 3.5.
However, you should establish the full facts behind the particular supply in question before assuming that zero rating is appropriate. If you intend to make such a supply and are unsure as to whether it may be zero-rated, you should contact our VAT: general enquiries.
The rest of this paragraph has the force of law.
When you make a supply of goods to an overseas person for export, but deliver them to a third person in the UK who is also making a taxable supply of goods or services to that overseas person, you can zero rate the supply provided:
- the goods are only being delivered and not supplied to the third person in the UK
- no use is made of the goods other than for processing or incorporation into other goods for export
- the goods are exported from the UK and you get evidence of export within the specified time limits
and your records show the:
- name and address of the overseas person
- invoice number and date
- description, quantity and value of the goods
- name and address of the third person in the UK to whom the goods were delivered
- date by which the goods must be exported and proof of export obtained
- date of actual exportation
3.7 If you cannot meet all the conditions
If you do not meet all the above conditions the supply cannot be zero-rated as an export and you must account for VAT at the appropriate UK rate (see paragraph 11.2).
It is therefore essential that you establish at the time of sale what type of export documentation will be sent to you to support the zero rating of your supply.