Common VAT Problems

5. Overseas VAT Issues

5.1 Imports of goods from another EU country ('acquisitions') will generally be free of any VAT charge.

• The supplier must show the customer's UK VAT number on their sales invoice.
• UK output VAT must be self-charged and declared in Box 2 of the relevant VAT return covering the date of the supply (known as Acquisition Tax). However, as long as the purchase is used to make VATable supplies the Box 2 VAT can be reclaimed as input VAT in the same return.

5.2 Imports of goods from outside the EU attract import VAT, at UK rates, which is payable on entry. Subject to the normal rules this can be reclaimed as input VAT. The import may also attract Customs duty which is also collected by HMRC.

• Customs duty is not recoverable.
• To reclaim import VAT, a VAT certificate C79 must be held.
• Payment of both import VAT and duty can be deferred which can speed through entry of goods into the UK.

5.3 Exports of goods to VAT-registered buyers in other EU countries ('dispatches') do not usually attract VAT.

• VAT should be added to sales invoices unless a valid domestic EU VAT number is quoted on the invoice. If a customer is not VAT registered, VAT must be charged on the sale. Such sales could give rise to EU registration requirements if sales volumes exceed local limits.

5.4 Exports of goods to countries outside the EU are zero-rated.

• VAT will be due on the sale unless evidence is held that the goods have left the UK within specified time limits.

5.5 Trade with the EU requires submission of statistical returns known as Intrastat and EC Sales Listings. Intrastat returns are required if the value of arrivals (purchases or EU imports) exceeds £600,000 or the value of dispatches (EU sales) exceeds £250,000, whereas EC Sales Listings are always required.

• If dispatches or arrivals are below the Intrastat threshold declarations are only required in boxes 8 and 9 of the VAT return.
• If they go above the threshold, a supplementary declaration will be required.