22 June 2017

Trade goods internationally? Make your way through our VAT compliance checklist

For those that trade goods internationally, we provide a handy VAT checklist to help make sure you comply with the current rules.

To help ensure the smooth and efficient operation of international trade, we recommend businesses review their procedures from time to time. This review will also act as a good base from which to begin Brexit planning, once more is known. The following checklist and questions aim to highlight some of the key issues to be aware of:

Imports

This covers goods purchased by businesses from non-EU countries.

  • Have you recovered import VAT? Import VAT is shown on the C79 certificate, sent by HMRC around the 24th of the following month. VAT can be recovered via the VAT return in accordance with the normal rules.
  • Have you retained the C79? Retain for seven years, as per normal accounting rules.
  • Have you considered customs reliefs? If the imported goods will be exported again, for example, after re-packaging and processing etc., reliefs from duty and VAT may be available.
  • If you have customs reliefs, are you complying with the conditions? Make sure you check any relevant approval letters.

Exports

This covers goods sent by businesses to non-EU countries.

  • Have goods left the EU within three months? This may be extended to six months if goods are sent to a third party for processing. Care is needed with indirect exports, usually where the customer exports Ex Works (EXW). Robust procedures are needed to ensure suppliers obtain the evidence on a timely basis. Suppliers may decide to manage risk by charging VAT, following this up with a credit note and a zero-rated invoice once the evidence is received from the purchaser.
  • Have you retained evidence that the goods left the EU? Those that export goods must retain official or commercial evidence which proves the goods left the EU within three months. Official evidence includes the Single Administrative Document endorsed by the tax authorities at exit, or the Goods Departed Message if using the electronic National Export System (NES). Commercial evidence includes authenticated waybills or the International Consignment Notes (CMR). The evidence must be supported by supplementary evidence, for example, sales contracts, packing lists and invoices. If businesses do not retain sufficient evidence, HMRC can assess for VAT on the value of the supply.
  • Does your invoice state why no VAT was charged? The mention of ‘export’ is enough.

Intra-EU acquisitions of goods

This covers where goods are purchased by businesses, where the goods physically come to the UK from another EU country.

  • Have you accounted for output tax in the UK at the appropriate rate? Self-accounted output VAT on EU acquisitions of goods must be included in box two of the VAT return.
  • Have you recovered the VAT? Input tax is recoverable in accordance with normal rules and is included in box four of the VAT return, with the net amount included in boxes seven and nine.
  • Have you included the purchase on the intrastat form? If £1.5 million worth of goods is acquired from the EU within a 12 month period, an arrivals intrastat form must be completed.

Intra-EU sales of goods

This refers to the situation where businesses sell goods to businesses in another EU country, with the goods physically leaving the UK and moving to another EU country.

  • Have you retained evidence of the goods leaving the UK within three months? Evidence is a combination of commercial and transportation documents, which must be obtained even if the EU customer arranges for delivery. The period can be extended to six months if the goods are sent to a third party for processing. HMRC will assess for VAT if evidence is not available.
  • Is the customer’s VAT number on the invoice? The VIES (VAT Information Exchange System) website can be used to check the validity of the registration number. It is recommended to retain evidence of this check.
  • Does the invoice refer to why no VAT is being charged? Statements such as ‘Intra-EU supply of goods – customer to account for VAT’ are sufficient.
  • Have you included the sale in the relevant returns? It must go on the VAT return, on the EC Sales List and, if sales are over £250,000 in a 12 month period, on the intrastat despatch return.

Should you require any assistance with the above, or if you have any questions, please feel free to contact us to discuss.

Bookmark and Share