If your business buys or sells goods or services outside the UK you will need to know how to deal with the VAT implications. There are different rules depending on whether you are dealing with a country inside or outside the European Union (EU). This is because VAT is a tax which is charged in the EU only.
What are imports?
Imports are goods or services which are brought into the UK from countries outside the EU.
VAT is charged at the point of entry into the UK. Any VAT paid on the goods may be reclaimed as input VAT, as long as you have a document called an import VAT certificate (C79).
If the service is supplied by an overseas business, the place of supply is the UK. This means you must account for the VAT in your VAT return, and in effect you act as both supplier and customer. You will charge VAT and may be able to claim it back – this is known as the reverse charge or tax shift.
What are exports?
Exports are goods or services produced in the UK that are then supplied to customers outside the European Union (EU).
The goods are zero rated. You (the supplier) must obtain and retain documentary evidence of the export.
If the service is supplied outside the EU it is outside the scope of VAT.
What are acquisitions?
Acquisitions are goods or services which are brought into the UK from countries within the EU.
1. If you (the customer) are VAT registered, the goods are zero rated. You must account for output VAT on your VAT return (at the rate applicable to your country) and you may be able to reclaim the amount as input VAT.
2. If you (the customer) are not VAT registered, the supplier must charge VAT at their usual rate.
If the service is received from a business within the EU the place of supply is deemed to be the UK. You, the customer must account for output VAT on your VAT return and you may be able to reclaim the amount as input VAT.
Dispatches are goods or services that you supply to customers within the EU.
1. If your customer is VAT registered, the goods are zero rated. The customer must account for output VAT on their VAT return (at the rate applicable to their country) and they may be able to reclaim the amount as input VAT.
2. If your customer is not VAT registered, you must charge VAT at the usual rate.
If your customer is a VAT registered business within the EU, the place of supply is deemed to be their country of residence. This transaction is outside the scope of UK VAT.
Do I need to show imports and exports on the VAT return?
Some boxes on the VAT return relate to transactions from outside the UK:
Box 2 is only used if items have been bought from other EC (European Community) countries, the figure will be taken from purchases, not sales. Multiply any purchases by the rate of VAT (20%).
If any acquisitions from EC member states were included in box 2 this amount must also be included.
Box 8 shows the total value of net sales (goods only) for the period (excluding VAT) to other EC member states. Do not include pence.
Box 9 shows the total value of net purchases for the period (excluding VAT) from other EC member states. Do not include pence.
Do I need to complete anything else?
If you supply goods to other EU member states you must complete an EC sales list VAT form 101.
Brexit: How could VAT rules change?
Brexit will change many things for UK businesses, especially those who buy from or sell to EU countries. So, how could import and export VAT rules change?