VEXP30310 - Conditions for zero rating: Exports/Removals affected by the COVID19 emergency

Introduction

Subject to meeting conditions, supplies of most goods for export or removal from the UK can be zero-rated by the supplier. One of the conditions being that the goods must be exported or removed within specified time limits.

During the COVID19 emergency it may not be possible to export/remove the goods within the prescribed time and so the supplier becomes liable to account for VAT on the supply.

This guidance explains the circumstances in which officers can agree to additional time for the export or removal before any tax is collected. This guidance does not cover the VAT Retail Export Scheme (VAT Regulation 131).

 

Legislation and Regulations

The relevant legislation is section 30(6) and 30(8) of the Value Added Tax Act 1994 and the following VAT Regulations and parts of VAT Notices having force of law (tertiary legislation).

  • Regulations 132-133 – Removals by individuals and visitors.
  • Regulation 155 – New Means of Transport (NMT)
  • Notice 703 Goods exported from the UK
  • Notice 725 The Single Market

VATA 1994, Section 30(10) covers the consequences of not removing the goods in time and gives HMRC discretion to modify the rules.

 

Background

HMRC has had a number of queries about time limits for exports and removals during the Covid-19 pandemic. We have not seen evidence that time limits are causing wide-spread problems, as most freight is still able to move between countries. However, we recognise that some intended exports/removals have been delayed.

We have considered if and how we might permit those prevented from meeting the time limits due to the COVID-19 emergency to still zero rate the supplies, provided the goods are exported or removed at the earliest opportunity.

The time limits for removal of the goods from the UK/EU are set out in legislation. However, HMRC has a discretion to permit non-observance of the conditions and time limits for export/removal of the goods.  HMRC will use its discretion to temporarily waive the prescribed time limits for removal/export on a case by case basis, in circumstances, where the goods have not left the UK due to the COVID-19 crisis.  The goods must, however, have either already been exported/removed or will be as soon as is reasonably practicable after the date a customer is notified that HMRC is temporarily waiving the tax. 

 

When can discretion be exercised

We will permit a temporary waiver if the following conditions are met:

  • it has not been possible to export or remove goods within the prescribed time limit due to the COVID-19 emergency. Examples include: The UK or another Government has imposed restrictions on the movement of goods or people due to COVID-19 that prevent the goods being exported to the intended destination. Cancellation of the intended mode of transport for reasons directly related to COVID-19. A participant in the export is ill due to COVID-19 and a substitute cannot be found. This list is not exhaustive.
  • the goods have been/will be exported or removed at the earliest opportunity;
  • all other conditions for zero rating exports or removals are met.

 

How to advise customers that cannot export/remove goods due to the COVID19 crisis

If you are reasonably satisfied that time limits cannot be met due to COVID-19 you may exercise powers in section 30(10) VATA as outlined above.

The suggested form of authorisation:

Thank you for contacting HMRC about exporting goods after the prescribed time limits.  As the delay results from the COVID19 emergency and was beyond your control, HMRC will exercise powers in VATA 1994, Section 30(10) to temporarily waive the requirement for the goods to have been exported within the relevant time limits.

HMRC understands that the following goods [enter description of goods] are affected and are those in respect of which HMRC is exercising its discretion. 

This waiver in relation to these goods will expire:

  • one month after any government-imposed restrictions are lifted or
  • one month after any COVID-19 impediment to the export or removal ceases, or
  • there ceases to be an intention to export or remove the goods from the UK

whichever is the earlier.

You must retain evidence that supports your case for the waiver as part of your business records (for example cancellation notes demonstrating that the transport you intended to use to take your goods out of the UK did not take place, or screen shots of government rules preventing the export or removal of the goods).

If you consider there are extenuating circumstances that mean additional time is needed to export or remove the goods beyond that permitted by this authorisation, please contact me setting out the details in full.  

Finally, this waiver of the requirement for the goods to be exported within the prescribed time limits is temporary and arises from the conditions and difficulties resulting from the COVID 19 emergency that you set out in your correspondence of [details of correspondence].  You must account for VAT on the goods if those circumstances prove to be different or any of the other conditions for the export zero rate are not met.

 

Annex –

This guidance applies to the following time limits:

Personal Export scheme VAT Notice 707  See paragraph 5.1

This scheme allows customers (UK, EU and overseas visitors) to buy a car for export VAT free, as long as they meet certain conditions.

Conditions -,

  • An overseas visitor must intend to export the vehicle within 12 months of delivery,
  • Any other person (UK or EU resident), must intend to export the vehicle within 6 months of delivery.

     

Sailaway boats supplied for export outside the UK and EU VAT Notice 703/2 See paragraphs 1.4 and  3.3

This scheme allows customers to buy a boat and export it VAT free where they meet the following conditions;

Conditions –

  • The boat must be used for the private purchase of a boat for private use by an overseas visitor.
  • The customer must intend to export the boat under its own power to a destination outside the UK within 6 months of the date of delivery.

 

New Means of Transport  VAT Notice 728 - see paragraph 6

This scheme allows customers entitled to use the scheme, to zero rate vehicles classified as a New Means of Transport.

  • To benefit from zero rating, the NMT must be removed from the UK within 2 months of the time of supply.

This only applies to vehicles leaving the UK. VAT will be charged on vehicles in the country of destination.

 

The Single Market  VAT Notice 725 - see paragraphs 4.3 & 4.4

This VAT Notice is about how to charge and account for VAT on the movements of goods within the single market.

Conditions

  • The customer’s customer is VAT registered in another member state and has notified the customer of their VAT number.
  • The goods are sent or transported out of the UK to a destination in an EU member state.
  • The customer must submit an EC Sales List accurately accounting for the supply.
  • The customer must keep valid evidence (see section 5) that the goods have been removed from the UK within the time limits set out in paragraph 4.4 (see the next two bullet points).
  • The time limit is 3 months from the time of supply for goods and,
  • The time limit is 6 months for supplies of goods involved in processing or incorporation before removal.

     

Goods exported from the UK VAT Notice 703  - see paragraph 3.5

This VAT Notice explains how and when the customer can apply zero-rated VAT to goods exported outside the UK or EU.

Conditions

  • The customer must hold either official or commercial evidence proving their entitlement to zero-rating.
  • Time limits in which the goods must be physically exported from the UK/EU.
  • Time limits in which the customer must obtain evidence of export to support zero-rating. 

The time limits are triggered from the time of supply. There is a table in paragraph 3.5 which shows the time limits for various types of export, most have a 3-month time limit, and a couple have a 6-month time limit.