TIIN on VAT: Changes to zero-rating of exports from the UK

HMRC have issued a Tax Information and Impact Note (TIIN) on the changes to VAT zero-rating of exports from the UK, reports small business accountants Harris & Co.

The TIIN explains an amendment to VAT Regulations 1995 (SI 1995/2518) to extend zero-rating to goods supplied to businesses registered for VAT in the UK but established in another country, where those businesses export the goods outside the European Union (EU). The measure brings the UK VAT treatment of such supplies in line with EU VAT law which says that where goods are collected by an overseas customer for subsequent export, the supply is eligible for zero-rating provided the customer is not established in the member state. Whether such a customer is VAT registered in the member state makes no difference to the VAT treatment of the supply.

VAT Regulations 1995 will also be amended to correct an outdated reference to Excise law where businesses dispatch goods to other EU Member States.

The changes to VAT Regulations 1995 will take effect from 1 October 2013. There will be additional costs for exporters who will be now be able to zero rate a supply of goods to UK VAT registered businesses established outside the UK. Those costs relate to a requirement to comply with the rules in VAT Notice 703.