VAT on export sales - recent VAT case shows the importance of evidence

As the world of business becomes more global, there is a high possibility that your business will export goods overseas. 

The export of goods to countries outside of the UK would normally be treated as zero-rated for VAT purposes.

However, HMRC recently won a First-tier Tribunal case against H Ripley & Co Ltd costing that company £1,176,161.

HMRC argued that the business had not retained the evidence required to prove the goods had left the UK and that therefore UK VAT was due.

This seemed a little unfair as HMRC only became interested in this company after the Belgian authorities had contacted them about some of the goods in question.

However, HMRC stated that the documentary evidence retained by the company was not sufficient to prove that the goods had left the UK (for about 72 instances of export).

The evidence required supported by law is detailed in Section 6 of HMRC’s VAT notice 703 (VAT on goods exported from the UK (VAT Notice 703) – GOV.UK (www.gov.uk)) and a summary of the kind of evidence that it is necessary to retain can be found here.

This case has shown the importance of keeping accurate and complete records and HMRC’s appetite to challenge record keeping. 

We are seeing more interest from HMRC in checking that export evidence has been retained when they have looked at clients’ VAT returns to check that repayments are appropriate. 

If you are unsure that your business is retaining the correct evidence to support the zero rating of exports then now could be a good time to check.

If you have any queries about the VAT treatment on your export sales or any other VAT matter, then please contact our specialist VAT Team.