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Autumn News
Foreign Peril
If you are selling goods to businesses abroad, you shouldn't have to charge VAT. It should either be an export out of the EU, or it should be a despatch to a VAT-registered customer in another EU country. You get VAT back on your costs but your customer only pays you the net price.The problem is that there are a lot of conditions to meet, and if you miss some of them you might find that the UK taxman still wants the VAT even though you didn't collect it from your customer. It's crucial to get the paperwork right - evidence that the goods were despatched out of the UK, and your customer's VAT number on the invoice if it's within the EU. The taxman is very picky about this, mainly because of the huge losses that "carousel fraud" has caused over the last few years - the honest trader has a harder job to prove that the transaction is genuine.
A recent case showed how easy it is to fall foul of the rules. A UK trader received an order from a company registered in Belize to send some goods to Poland. The trader checked with the HMRC Advice Line, but didn't make the question clear enough. It wasn't an export because the goods stayed in the EU - and it wasn't an EU despatch because the customer was outside the EU. The UK company fell between two stools and had to pay the VAT.
If you are in doubt about the conditions for zero-rating international sales, we can advise you.
