VATRES6250 - Personal exports - retail exports: Assurance at the retailer: Lack of internal checks by retailer

Returned goods

Always check to see what system the trader has in place to identify and deal with returned goods originally sold under VAT retail export scheme.

Fraud can occur where an entitled person buys goods, completes a VAT refund document, and then returns the goods to the retailer to obtain a credit or refund of the VAT inclusive cost of the goods. If they are allowed to retain the completed VAT refund document, this may be certified with a false UK or EC customs stamp and returned to the retailer or refund company to obtain a further refund of the VAT. A variant on this is that the goods are produced to customs at the point of departure and the refund form stamped, but the goods are then diverted, remain in the UK, and returned to the store for a full refund after the traveller has already received a VAT refund.

Ensure that, as a minimum, where VAT refund documents are issued to customers, the retailer indicates this on the sales invoice / till receipt, for example with a stamp indicating “VAT Refund”. Also, any VAT refund document issued must be cancelled if a credit note for the goods is issued or cash refund made.

Checks against the refund company schedules of refunds

The retailer should check the refund company’s schedule of refunds against the original sale to ensure that the sale has actually been made (and not subsequently cancelled), and that the amount of VAT is the same. With larger retailers, where there can be a huge number of refund documents, and where manual 1-to-1 matching would be very resource-intensive, look to see if there is any electronic matching process, or failing that selective checks or reconciliations.

Checks on VAT refund documents

Examination of the completed forms quickly reveals any shortcomings in the standard of information retained in the retailer’s records about travellers and goods sold. Aspects that require improvement should be obvious. VAT refund companies may be able to help by providing details in electronic format that can be sorted by computer.