VAT on Exports

The internet has enabled many small businesses to sell internationally, but exporting goods and services can create VAT difficulties.

For VAT purposes you need to know whether you are selling goods (physical things), or services (things you can't physically touch eg: down-loaded software), as the rules vary for goods as opposed to services. You also need to know where your customer is based - in an EU country or elsewhere and whether the customer is a VAT registered business.

When you sell goods to other businesses in the EU or in other countries you can normally charge the zero-rate of VAT on the sale. This means you can recover VAT on any related input costs. However, you need to show that your customer was VAT registered and the goods physically left the UK. Getting the paperwork right is essential.

The rules for international services are more complicated as they depend on the place of supply of the service, which varies according to the type of service supplied and who it is supplied to (business or non-business customer). UK businesses selling to private customers in other EU countries must charge UK VAT. Where the customer is a business in another EU country, in most cases the customer accounts for the VAT in their own country, so the UK supplier does not charge VAT.

Whether you sell goods or services to VAT-registered businesses within the EU you must complete an EC sales list (ESL). If you only supply services, or your total goods and services sales do not exceed £35,000 per quarter, you may submit the ESL every quarter, otherwise you must submit monthly ESLs. Certain low-volume exporters can apply to the Taxman for permission to submit annual ESLs.

The ESL can be submitted in paper form on VAT 101, or online through the HMRC website, but it must contain the following details:

- your customer's name;
- the relevant country code for each customer; and
- the value of the goods and/or services supplied.

We can complete the ESL on your behalf, just like your normal VAT return.