Find out when goods can be zero-rated if they’re sold to overseas visitors for personal use by a VAT-registered business.
This notice cancels and replaces Notice 704 (July 2003).
Regulation 131 of the VAT Regulations 1995 sets out conditions for using the Retail Export Scheme. This regulation also gives the Commissioners power to impose further conditions which must be met to allow a supply to be zero-rated.
Parts of this notice have the force of law under that regulation and will be indicated with text such as:
“The next sentence has force of law.
There is no facility to have your refund document stamped in your country of destination.”
1.1 Information in this notice
This notice explains when supplies of goods sold by VAT-registered retailers to entitled persons for personal use and exported as accompanied baggage can be zero-rated. In particular, it sets out the conditions that must be complied with by retailers and entitled customers using the VAT Retail Export Scheme.
1.2 The changes in this notice
Paragraph 9.1 now includes a link to a list of EU countries.
There’s a new way to contact us with any comments.
1.3 Who should read this notice
This notice is intended for retailers and entitled customers.
1.4 The law
Article 131 of The Principle VAT Directive states that member states shall lay down conditions ‘for the purpose of ensuring the correct and straightforward application of such exemptions (zero rating) and preventing any evasion, avoidance or abuse’. Under UK VAT law, the Commissioners of HMRC may specify conditions in regulations or otherwise impose conditions to meet this requirement.
The VAT Regulations 1995 and this notice lay down the conditions for the VAT Retail Export Scheme which must be met in full for a supply of goods for export outside the EU to be zero-rated. As these conditions have legal status, some legal wording has been necessary but plain English has been used wherever possible.
1.5 Where to obtain further information if you’re a traveller
Retailers and travellers may obtain further information and advice from the VAT: general enquiries helpline.
A simplified notice aimed specifically at travellers, Claim VAT back on tax-free shopping in the UK (VAT Notice 704/1) highlights the main aspects of the scheme.
Tourist and travel organisations as well as the VAT refund companies distribute information about the VAT Retail Export Scheme.
(Whilst retail export schemes operate throughout the EU they’re regulated by the laws of the individual member states and may differ in significant details from the scheme in the UK. Travellers wishing to purchase goods in another EU member state should contact the customs or tax authorities of the member state for detailed information and advice.)
2. General principles
2.1 The VAT Retail Export Scheme
The VAT Retail Export Scheme allows:
- certain customers (see paragraph 2.4) to receive a refund of VAT paid on goods exported to destinations outside the EU subject to conditions detailed at paragraph 2.3
- retailers to zero rate goods sold to entitled customers when they have the necessary evidence of export and have refunded the VAT to the customer
This is a voluntary scheme and retailers do not have to operate it. Those who do must ensure that all the conditions set out in this notice are met.
2.2 Minimum sales value
The scheme has no minimum sales value, although retailers may set a minimum sales value below which they will not operate the scheme.
2.3 Conditions of the scheme
This section has force of law.
Retailers and refund companies (see paragraph 5.5) may only operate the VAT Retail Export Scheme when they comply with the conditions set out in this notice. Briefly these are the:
- customer must be entitled to use the scheme (see paragraph 2.4)
- goods must be eligible to be purchased under the scheme (see paragraph 2.6)
- customer must make the purchase in person and complete the form at the retailer’s premises in full (see paragraph 3.1 and 7.4.2)
- goods must be exported from the EU by the last day of the third month following that in which the goods were purchased
- customer must send the retailer or the refund company evidence of export stamped by customs on an official version of form VAT407, an approved version of form VAT407 or an officially approved invoice (see section 4)
- retailer or the refund company must not zero rate the supply until the VAT has been refunded to the customer (see paragraph 5.2)
2.3.1 Time limit for export
The goods must be exported from the EU by the last day of the third month following that in which the goods were purchased. The time limit for export cannot be extended.
The next sentence has force of law.
Retailers and refund companies must not zero rate goods exported after the last day of the third month following the month in which the goods were purchased - even if the VAT refund document has been stamped in error by a UK or other EU customs officer.
2.4 Who can buy goods under the scheme
2.4.1 Overseas visitors
An overseas visitor is a traveller (including a member of the crew of a ship or aircraft) who is not established in the EU. This means a person:
- whose domicile or habitual place of residence is not situated within the EU, a person’s ‘domicile or habitual residence’ is the place entered as such on their valid passport, identity card or other acceptable document, such as a driving licence - the customer must prove their eligibility to use the scheme by providing one or more of these documents
- who intends to leave the UK for a final destination outside the EU, with the goods, by the last day of the third month following that in which the goods were purchased (for example, goods purchased on 1 June must be exported by 30 September)
- who exports the goods having produced them, their receipts, and the VAT refund document to a customs officer at the point of departure from the EU
2.4.2 Overseas visitors who study or work in the UK
Overseas visitors (see paragraph 2.4.1) entering the UK as students or migrant workers are only entitled to purchase goods under the scheme during the last 4 months of their stay in the UK. Such visitors will have been issued with a pre-entry visa from the UK and in the case of work periods of 6 months or more a separate work permit document is issued in the UK. The visa is contained in the overseas person’s passport and shows the start and end date for the study or work period authorised. Retailers should ask to see the visa or work permit before selling goods under the scheme.
The customer must prove their eligibility to use the scheme by providing evidence that the period of their visit is ending and must:
- intend to leave the EU with the goods by the last day of the third month following that in which the goods were purchased
- having left the EU remain outside the EU for a minimum period of 12 months
- export the goods having produced them, their receipts, and the VAT refund document to a customs officer at the point of departure from the EU
2.4.3 Entitled EU residents
For the purposes of this scheme only, a customer who’s established in the EU but intends to permanently leave the EU for a minimum period of 12 months may also be treated as an overseas visitor. To qualify under this provision, the customer must:
- intend to leave the UK with the goods by the last day of the third month following that in which the goods were purchased for an immediate destination outside the EU
- remain outside the EU for a period of at least 12 months, the customer must prove their eligibility to use the scheme by providing evidence of their intention to remain outside the EU for at least 12 months, typically this evidence would be one of the following:
- overseas work permit
- approved visa application
- residency permit
- export the goods having produced them, their receipts, and the VAT refund document to a customs officer at the point of departure from the EU
2.5 Countries in the EU
The VAT territory of the EU is made up of 25 member states (27 from 1 January 2007), including some territories with which certain countries have links. Goods cannot be purchased under this scheme for removal to another member state. Details of the fiscal (VAT) territory of the EU and of the special territories that are outside the EU for VAT purposes are in section 9.
2.6 Goods that can be sold under the scheme
This section has force of law.
Standard-rated goods and lower-rated goods with the exception of those listed may be sold under the scheme:
- new and second hand motor vehicles for personal export
- boats sold to visitors who intend to sail them to a destination outside the EU (see VAT Notice 703/2: sailaway boats supplied for export outside the EU)
- goods over £600 (excluding VAT) in value exported for business purposes (see VAT on goods exported from the UK (Notice 703))
- goods that will be exported as freight or unaccompanied baggage (see VAT on goods exported from the UK (Notice 703))
- goods requiring an export licence (but antiques can be sold under the scheme even if they require an export licence)
- unmounted gemstones
- bullion (over 125 grammes, 2.75 troy ounces or 10 Tolas)
- goods for consumption in the EU - no certification of export will be given for used consumable items, for example, perfume which is wholly or partly consumed in the EU
- goods purchased by mail order including those purchased over the internet (see paragraph 2.8)
Zero-rated goods such as books and children’s clothing cannot be sold under the scheme.
2.7 Exclude certain goods from the scheme
Retailers can exclude certain goods if they wish. They do not have to operate the scheme for all lines of goods that they sell.
2.8 Sales by mail order or goods sold over the internet
The scheme cannot be used for goods sold to entitled persons by mail order or over the internet will fall within the export rules set out in Goods exported from the UK (VAT Notice 703). But, a mail order company or an internet retailer with a retail outlet can use the scheme for goods sold from that outlet provided they comply with all the conditions set out in this notice.
The scheme cannot be used for services supplied to customers such as hotel accommodation, meals and car hire, it’s for the sale of goods only.
This applies even where services are sold with the goods, for example labour costs for fitting spare parts to a motor vehicle. Where a vehicle brought into the UK for the use of the overseas visitor requires repairs, the sale of the spare parts only and not the cost of fitting can be included in the scheme.
See Goods exported from the UK (VAT Notice 703) for guidance on what to do in the case of a vehicle owned by an overseas person and temporarily imported for work. Extended warranty work may not be zero-rated under the VAT Retail Export Scheme.
3. Making a sale under the VAT Retail Export Scheme
As a retailer, you’re strongly advised to have access to this notice and Claim VAT back on tax-free shopping in the UK (VAT Notice 704/1) to help you explain the scheme to customers who may not have obtained a notice for themselves.
3.1 What to do at the time of sale
Please note that for you to comply with the conditions of the scheme your customer must attend in person at the time of the sale although a third party may pay for the goods. There is no facility under this scheme for a representative to attend in place of the entitled person at the time of the sale.
When customers ask to use the scheme you must take the following steps.
|1||Check that they’re entitled to use the scheme (see paragraph 2.4)|
|2||Check that the goods are eligible for the scheme (see paragraph 2.6)|
|3||Check that the customer intends to leave the EU with the goods for a final destination outside the EU by the last day of the third month following that in which the goods were purchased|
|4||Fill in a VAT refund document. A responsible member of staff should complete the document. Ensure all sections are fully completed, unused lines are ruled through and the customer and retailer declarations are signed at the time of the sale (see paragraph 4.2 for full details)|
In addition give your customer a copy of Claim VAT back on tax-free shopping in the UK (VAT Notice 704/1) and:
- agree with your customer how the refund will be made (it would be useful to provide your customer with a reply paid envelope for the refund document to be returned after stamping by customs)
- explain about any administrative fees
- mark your customer’s sales receipt to indicate that the goods have been included on a VAT refund document, for example, ‘VAT export’
- explain that no refunds will be made on items (such as perfume) wholly or partly consumed in the EU
- advise them to produce their refund document to the customs officer for stamping at the point of departure from the EU, explain that failure to do so will mean that a refund will not be paid, the goods and receipts must also be available for inspection if required (see paragraph 3.4 if the customer is departing the EU on a through (transit) flight)
- advise them to allow plenty of time in which to produce their goods and refund form prior to departure, this is particularly important if they’re exporting goods in hold baggage as they may need to allow up to 2 hours in addition to their advised check in time in case of queues
- advise them to carry items of high value, for example, jewellery, furs, cameras, watches, silverware, laptop computers and small antiques in their hand baggage
- you may also wish to advise your customer to take a photocopy of the VAT refund document once it has been stamped by customs
3.2 Refund documents
When you make a sale under the scheme to an entitled person going to a final destination outside the EU you must complete a VAT refund document. The document can be a form VAT407 or an officially approved invoice that both you and your customer must sign at the time of the sale.
The document must be the original signed by you or your representative and by your customer - photocopies will not be accepted by customs at export.
3.3 Issue of VAT407 forms
Blank VAT407 forms must not be issued to members of the public. They must only be issued to VAT-registered retailers who operate the VAT Retail Export Scheme.
3.4 Produce goods and refund documents to customs
You should give customers a copy of Claim VAT back on tax-free shopping in the UK (VAT Notice 704/1) and advise them that:
- they must produce the VAT refund document to the customs officer at the point of departure from the EU
- the goods and receipts must also be available for inspection if required
- the customs officer will stamp the refund document to show that the goods have been exported and return it to the customer
- they should send back to you or to the refund company the refund documents stamped by the UK or EU customs officer
- they should use the reply paid envelope you provide, or hand the documents to the cash refund booth, if appropriate (see paragraph 6.4)
Remember, whilst a single refund document is acceptable, it’s recommended that you issue separate VAT refund documents (but make only one administrative charge) if the customer intends to carry some goods in hand baggage and other goods in hold baggage. This is particularly important if the customer is leaving on a through (transit) flight via another EU airport because the goods in hold baggage must be declared before check in, whilst the goods in hand baggage must be declared at the final point of departure from the EU.
3.5 Goods not exported
When customers present the VAT refund documents to the UK or other EU customs officer, they’re making a declaration that all the goods shown on the document are being exported from the EU. Customers sometimes decide not to export goods purchased under the scheme.
You should inform your customer that any goods listed on the VAT refund document not exported from the EU must be clearly deleted from the document before it’s presented to a UK or EU customs officer for stamping. It is a customs offence to make a false declaration.
3.6 Charging for administrative or handling expenses
If you intend to deduct an amount from the refund due, to cover administrative or handling expenses, the amount of the administration fee and net refund due must be shown clearly on the VAT refund document. You’re strongly advised to explain this charge clearly to your customers when they buy the goods to avoid subsequent confusion or misunderstanding.
3.7 Refunds to customers
When you receive a VAT refund document stamped by UK or other EU customs, check that all goods have been exported from the EU by the last day of the third month following that in which the goods were purchased.
Where they have, you should make any refund due to your customer by the method agreed at the time of sale.
You cannot zero rate the sale unless you have a stamped VAT refund document showing that the goods have been exported within the time limit and can show that the refund has been made to your customer.
Refund forms stamped outside the EU are not to be accepted as evidence of export under any circumstances.
4. Completion and control of refund forms
You may use a form VAT407 or adapted invoice for the scheme.
4.1 Form VAT407
If you use form VAT407 the following versions can be used:
- form VAT407 issued by customs, available free of charge from the VAT: general enquiries helpline
- your own version of the form VAT407, containing the same information as the customs version and approved beforehand by customs
- a refund company’s version of the form VAT407, containing the same information as the customs version and approved beforehand by customs
4.2 How to complete form VAT407
When completing a form VAT407 the following instructions must be followed.
|A||Customer||Make sure your customer completes this part legibly in full at the time of sale and signs the declaration.|
|B||Retailer||(a) Give a full and accurate description of the goods quoting identification numbers, serial numbers or other identifying marks for example hallmarks, together with the quantity (and weight in the case of jewellery) of goods sold. Descriptions such as stock numbers, ‘see invoice attached’, ‘Jewellery’ or ‘Designer goods’ are not acceptable. The description must be clear enough to allow the UK or EU customs officer to readily identify the goods.
(b) Cross through any unused lines on the form.
(c) Show the total amount payable including VAT in both words and figures, the amount of VAT included in the price, the amount of any administration fee that will be deducted from the refund and the amount of refund that will be paid to the customer.
|C||Retailer||(a) Insert the full name of your business, address and VAT number.
(b) Insert the date the goods were sold to the customer.
(c) The declaration must be signed either by yourself or another responsible person in your business.
|D||Customs officer||At the point of departure from the EU a customs officer must stamp the form to validate the export. (Whilst desirable, it is not essential the customs officer signs the form.)|
Customs officers may refuse to stamp refund forms completed incorrectly or not completed in full. For example, forms showing inadequate descriptions of goods may be rejected.
4.3 Officially approved invoice
If you do not use one of the versions of form VAT407 described at paragraph 4.1 you may use an officially approved invoice. You should be aware that if you do use an officially approved invoice you must meet the requirements of invoicing legislation. The invoice must include the details set out at paragraph 4.3.1.
4.3.1 General information required on an invoice
Where the total consideration for a supply (including VAT) is less than £250 a simplified invoice may be issued. Simplified invoices must show:
- your name, address and VAT registration number
- the time of supply
- a description sufficient to identify the goods supplied
- the total amount payable including VAT
- for each rate of VAT chargeable, the gross amount payable including VAT and the VAT rate applicable
Where the total consideration for a supply (including VAT) is £250 or more, the invoice must show:
- an identifying number
- your name, address and VAT registration number
- date of issue
- time of supply (tax point - only needs to be shown if different from the date of issue)
- your customer’s name (or trading name) and address (where an approved invoice is used for the scheme the usual address will be your customer’s place of residence outside the EU)
- a description identifying the goods you are supplying
- the gross total amount payable excluding VAT
- the rate of any cash discount offered
- the unit price (see VAT guide (VAT Notice 700))
- the total amount of VAT charged, shown in sterling
For each description of goods you must show the:
- quantity of goods
- rate of VAT
- amount payable excluding VAT
Provided your customer agrees, a retailer may issue a modified VAT invoice showing the VAT inclusive amounts of each supply instead of the VAT exclusive values. However, in all other respects the modified invoice should show the details required for a full VAT invoice (see VAT guide (VAT Notice 700))
Remember, you cannot use the VAT Retail Export Scheme for services.
4.4 Design and size of own versions of VAT407s or invoices
This section has force of law.
The VAT407 or invoice must closely follow the design of the Customs and Excise version of form VAT407.
It must include the data protection statement shown on the face of the form and the information shown on the reverse side of the Customs and Excise version of form VAT407. This includes:
- the heading ‘Retail export scheme’
- providing spaces for the retailer’s and the customer’s declarations as stipulated on the form VAT407, including details of the customer’s passport or identity number and country of issue, date of arrival in the EU, intended date of departure from the EU
- a separate box not less than 5 centimetres by 3.5 centimetres for official stamping by a customs officer at the customer’s point of departure from the EU
The total amount payable must be shown in words as well as figures.
Each VAT407 or invoice must show the amount of any administrative charge and the net refund due to the customer.
4.5 Prior approval of own versions of VAT 407s or invoices
You must seek approval beforehand from HMRC if you wish to use your own adapted VAT407 or invoice for sales made under the scheme.
Remember, if you use an officially approved VAT407 or invoice you must still make sure that your customer is entitled to use the scheme and that the declarations are completed in full and signed by you (or another responsible person in your business) and your customer at the time of the sale.
4.6 Obtain approval from HMRC
If you do not intend to use form VAT407 issued by HMRC you must send a sample of your own invoice or version of the VAT407 refund document for approval to HMRC. Addresses can be obtained from the VAT: general enquiries helpline.
4.7 Reply-paid envelope
Each year several hundred VAT refund documents are returned to customs at Heathrow Airport for a variety of reasons. This is usually because the postage has not been paid and because the document contains a customs stamp. Whether using a form VAT407, your own or a refund company’s version, or an adapted invoice, give your customer the fully completed VAT refund document and a reply paid envelope addressed to either you or the refund company administering the refund. If you do not provide a reply-paid envelope, you should make it clear that your customer is responsible for providing the envelope and paying the correct postage.
4.8 Complete the VAT refund form for past purchases
Paragraph 3.2 states that refund forms must be completed at the time of sale. Customers may ask you to complete a refund form to cover past purchases. You may only agree to such requests provided you have adequate security procedures in place to prevent abuse of the scheme. This includes:
- stamping till receipts to show that the goods have been purchased under the Retail Export Scheme, for example ‘VAT export’
- your till system allowing you to check that the receipts produced are genuine and can only appear once on a VAT407 refund document
- your system allowing you to check whether a:
- refund for returned goods has already been made for a receipt now produced
- VAT407 refund document has been issued for goods where a refund for returned goods is now sought
The next sentence has force of law.
Where you cannot show that you have adequate security procedures in place, you must continue to complete VAT refund documents at the time of the sale.
4.8.1 Completion of refund documents on production of receipts for past purchases
Where you do have adequate safeguards in place to prevent abuse of the scheme and a customer asks for a refund document to cover a series of purchases over a period of time, you must include only those goods that will be exported by the last day of the third month following that in which the goods were purchased. The purchase date entered on the refund document must be the date of the earliest purchase.
4.9 Control of blank or partly completed VAT refund documents
You must keep stocks of the blank documents secure and not issue blank or party completed forms to any person outside your business, whether you use:
- form VAT407 issued by customs
- a refund company’s version of the form
- your own officially approved invoice
4.10 Uncertified export documents
The next paragraph has force of law.
If your customers send you VAT refund documents which have not been stamped by UK or other EU customs, you cannot zero rate the supply because export of the goods from the EU has not been certified as required by the scheme.
There are no exceptions to this rule.
4.11 Lost refund documents
4.11.1 Document lost before certification
If your customer has lost the VAT refund document before leaving the EU and asks for another, you can prepare a ‘duplicate’ clearly marked as such. The duplicate form and the goods must be produced to the customs officer at the point of departure from the EU. You should take steps to ensure that should the original document appear it is not processed through your records.
When issuing a duplicate document, you must:
- make sure the original document has not been received and processed by you already
- be satisfied that a sale took place by the production of till receipts or other information
- advise the traveller if they find the original refund document later, it is to be cancelled
If you later receive the original document ensure it is cancelled.
4.11.2 Document lost after certification
If your customer has lost the VAT refund document after stamping by UK or other EU customs, you may issue a duplicate only where a photocopy of the stamped original is produced. Duplicates of forms lost after customs stamping must not be issued in any other circumstances.
The duplicate and the photocopy of the original document stamped by customs must be sent to the customs officer who stamped the original document. If satisfied, the customs officer will stamp the duplicate and return it to you so that a refund may be made.
5. Accounting for VAT
5.1 Whether to charge VAT at the point of sale
You must treat any sale of standard-rated and lower-rated goods you make under the scheme as liable to VAT until you have received the VAT refund document appropriately stamped by a UK or other EU customs officer. It’s in your interest to charge VAT at the point of sale, and refund it to your customer only when you get valid evidence of export. Until you receive the necessary evidence of export and make the refund to your customer you will have to account for the VAT due.
5.2 Before you zero rate the sale
The next 2 sentences have force of law.
You must obtain the stamped refund document and refund the VAT to your customer by the agreed method. You must retain the stamped refund document and evidence of the refund made to your customer to support the zero rating of the supply.
If the certified VAT refund document arrives after you have accounted for VAT, you can refund the VAT and zero rate the sale by reducing your output tax by the relevant amount in box 1 of your VAT Return for the period in which the evidence is received and the refund is made - see VAT guide (Notice 700).
5.3 Retailers who use a retail scheme
The individual retail schemes notices (in the 727 series) will explain how you should deal with sales and refunds under the VAT Retail Export Scheme in your retail scheme calculations.
5.4 Retailers who do not use a retail scheme
You must keep a record of all sales including VAT made under the VAT Retail Export Scheme. When you receive a VAT refund document stamped by a UK or other EU customs officer and you have refunded the VAT, you can zero rate the sale in your records.
5.5 Refund companies
You may contract with a refund company to administer the refund on your behalf. Refund companies usually provide an officially approved VAT refund document of their own design for use by retailers. If you use one of these companies, you still have to account for the VAT, as explained in paragraphs 5.1 and 5.2. You must retain the certified VAT refund documents and evidence that the VAT has been refunded in your records to support any zero rating claimed.
5.6 Concession shops
Many larger stores operate concessions for other retailers within their own stores, where one counter or area sells goods from another retailer’s range. Where the sale is rung through the main store tills it’s acceptable for the VAT refund document to be issued by the host store (typically at the main customer service desk). In these circumstances the host store is responsible for complying with the conditions of the scheme as set out in this notice and for accounting for the VAT.
However, where the concession operates its own tills and issues receipts in its own right showing its own name and VAT number, any VAT refund documents relating to these purchases must be issued by the concession and not the host store. In these cases the concession is responsible for complying with the conditions of the scheme as set out in this notice and for accounting for the VAT.
5.7 Direct reclaim system
The direct reclaim system involves 2 distinct transactions. A retailer sells goods to a refund company who immediately sells them on to an eligible traveller. The accounting procedure is that the:
- retailer must invoice the sale to the refund company because this is a business-to-business supply, not a retail sale, and account for VAT on the supply - see paragraph 4.3.1 for the information that must be included on a VAT invoice
- refund company may use the invoice from the retailer to reclaim input tax on the purchase from the retailer, the VAT guide (VAT Notice 700) provides information on the rules for invoices and claiming input tax
- refund company must also account for VAT on the sale to the traveller, it may subsequently zero rate the supply but only where and when all the conditions of the VAT Retail Export Scheme set out in this notice are met
- retailer may include the sale to the refund company in their daily gross takings for retail scheme purposes if they wish
5.8 Sales under the Margin Scheme for second-hand goods, works of art, antiques and collectors items
If you make sales under the Margin Scheme for second-hand goods, accounting requirements will differ from those that must be fulfilled under the VAT Retail Export Scheme. You can use the 2 schemes for a single sale if you adapt the VAT refund document as follows:
- head it ‘Second-hand goods - this document is adapted in accordance with Notice 704, paragraph 5.8’
- leave the line ‘Amount of VAT included in the price’ blank
- complete the refund due box
5.9 Sales by auctioneers
If an auctioneer sells goods on your behalf to someone who is entitled to use the Retail Export Scheme and a VAT refund document is completed, you can zero rate the sale when:
- the VAT refund document stamped by a UK or EU customs officer is returned to you
- you have made the refund to your customer
However, the VAT Retail Export Scheme can no longer be used for goods exported as freight (see paragraph 6.2). Exports of goods by freight should be made in accordance with the procedures described in Goods exported from the UK (VAT Notice 703).
If auctioneers are registered for VAT and sell goods in their own name to someone who is entitled to use the scheme then, for VAT purposes, they may be treated as both receiving and making a supply of goods in accordance with the VAT guide (VAT Notice 700). They can zero rate the sale provided they hold a VAT refund document stamped by a UK or EU customs officer and have refunded the VAT to their customer.
5.10 VAT treatment of administration or handling fees
If you deduct an amount from the VAT refund due to cover administrative or handling expenses, the amount you deduct is a consideration for the supply of the service to your customers in connection with the export of goods to a destination outside the EU, and is zero-rated.
6. Other information
6.1 Goods exported as hold baggage
Customers leaving by air may not always be able to export large or heavy items as hand baggage and customers buying such items should be advised to inform customs before checking their baggage in. The airline enquiry desk can tell your customer of the customs arrangements in force, as these vary from airport to airport.
Advise your customer that during busy periods queues are likely. Therefore they may need to allow up to 2 hours, prior to check in and the security procedures, to produce the goods and refund document. Long queues at the airport will not be accepted as a reason for failing to obtain a customs stamp on the refund form.
6.2 Goods exported as freight
The concession allowing the Retail Export Scheme to be used for goods exported by travellers as freight (including unaccompanied baggage, courier and post) was withdrawn on 1 July 2003. The procedures for exporting goods by freight are described in Goods exported from the UK (VAT Notice 703).
6.3 Supplies to diplomats, members of international organisations and NATO forces in other member states
The scheme cannot be used for such supplies. There are special arrangements under Article 15(10) of the EU Sixth VAT Directive - see The single market (VAT Notice 725).
6.4 Cash refund booths
Some refund companies have arrangements with refund booths at ports, airports and border crossing points from which cash refunds can be made to travellers before they leave the EU. In addition some refund companies will pay cash refunds to travellers in local currency at their destinations. The cash booth may charge your customer an additional administrative fee for these facilities. In all cases the customer will need to have their VAT refund document stamped by customs at the place of departure from the EU.
6.5 Export licensing
Antiques may be exported only on production of a valid export licence to customs at the point of departure from the UK. Further advice can be obtained from:
The Department for Culture, Media and Sport
2-4 Cockspur Street
If you sell goods that fall into this category you should explain this to your customers. They will probably need your assistance to obtain an export licence.
6.6 Information on other types of exports
Goods exported from the UK (VAT Notice 703) contains further guidance on zero rating goods sent directly from the UK as freight or by courier or post.
7. Information for travellers
7.1 The VAT Retail Export Scheme
While you’re in the UK you will pay VAT on most goods that you buy. The VAT Retail Export Scheme allows you to claim a VAT refund on some of those goods by following the conditions summarised at paragraph 2.3. Many shops in the UK will advertise the scheme as ‘Tax-free shopping’.
7.2 To qualify to use the scheme
Paragraph 2.4 explains who is entitled to use the scheme.
7.3 Can you use the scheme for everything that you buy
Not all shops operate the scheme, check before you buy. You cannot use the scheme to get a refund of VAT on meals and services such as hotel accommodation, car hire, taxi fares, and so on, even though you may have been charged VAT on them.
The scheme may be used for any standard-rated and lower-rated goods except those listed in paragraph 2.6. There are different rules for these goods. You can get details and copies of the relevant notices from the VAT: general enquiries helpline.
Under certain circumstances business travellers may obtain refunds of VAT paid on services provided and goods consumed in the EU. Claim back VAT paid in the EU if you’re established elsewhere (VAT Notice 723A) explains the conditions and how to make a claim. Customs officers at the place the traveller departs the UK are not involved in the refund of VAT on business expenses.
7.4 Making a purchase using the VAT Retail Export Scheme
7.4.1 Before you buy the goods
Check that the retailer operates the scheme. Retailers do not have to operate the scheme, but those who do usually advertise the scheme as ‘Tax-free shopping’.
7.4.2 How to buy tax-free goods
Purchases must always be made by you personally although they may be paid for by a third party. There is no facility under this scheme for a representative to attend in your place at the time of sale.
7.4.3 When you buy the goods
When you buy the goods:
- tell the retailer that you want to use the scheme
- ask the retailer to explain how the scheme works, you should make sure you understand what you have to do
- tell the retailer your country of final destination, the retailer will ask you to provide proof that you are eligible to use the scheme (see paragraph 2.4)
- the retailer will ask you to complete and sign a VAT refund document at the time of sale in his presence - make sure that you complete part A in full, incomplete forms will not be stamped by customs
- make sure the retailer fully completes part B including an accurate description of the goods and signs the retailer’s declaration in part C
- discuss with the retailer how the refund will be made, for example, cheque or credit card, how long it will take to receive the refund and any administration charges they will make
The retailer will then give the completed VAT refund document to you. You may also be given a reply paid envelope. If the retailer does not give you one, you must provide an envelope and pay the postage for the return of the refund form after it has been stamped by customs.
Remember, you must not allow anyone to sign the refund document on your behalf. If you do so, you will not be entitled to a VAT refund.
7.4.4 VAT refund document given to you by the retailer
The retailer will give you one of the following documents:
- an official form VAT407
- a shop or refund company’s own version of the VAT407 form
- a sales invoice that is headed ‘Retail export scheme’ and contains all the details that are shown on a form VAT407
7.4.5 If you return the goods to the shop for a refund or exchange
If you wish to return goods that have been sold to you under the scheme, either for a full refund or for exchange you must also take your receipt and the VAT refund document back to the retailer. The retailer will delete the entry for the returned goods or cancel the VAT refund document and issue a new one as appropriate.
7.4.6 Using the scheme without an approved VAT refund document
You cannot use the scheme without one of the refund documents described in section 4. These forms are only available from VAT-registered retailers who operate the scheme. They are not available to travellers at airports, ports or from HMRC. Till receipts alone are not acceptable for the scheme as operated in the UK.
7.5 Exporting the goods
7.5.1 When you must export the goods
You must export the goods from the EU by the last day of the third month following that in which the goods were purchased. For example, goods purchased on 3 February have to be exported by 31 May.
7.5.2 What you must do when you leave the EU
(a) Leaving for an immediate destination outside the EU:
- if you are not travelling to any other country within the EU, you must present your refund document to customs at your port or airport of departure when you leave the UK - the goods and receipts must also be available for inspection if required
- if you are leaving by air and have goods that are too large or heavy to carry on board the aircraft you may pack them in your hold baggage - if you do this, you should contact the customs officer before you check in and produce the goods for examination and the refund document for certification - however, you should always carry high value items in your hand baggage, this includes jewellery, furs, cameras, expensive watches, silverware, laptop computers and small antiques - contact the airline or airport enquiry desk to check the arrangements in force as these vary from airport to airport
- during busy periods, queues are likely and you should allow yourself plenty of time in which to produce the goods and refund document before departure - this is particularly important if you are exporting goods in your hold baggage as you may need to allow up to 2 hours in addition to your advised check in time - long queues will not be accepted as a reason for not obtaining a UK or EU customs stamp on the refund document
- if satisfied that all the conditions of the scheme have been met the customs officer will stamp your VAT refund documents
(b) Leaving the EU via another EU country
If you are departing the EU via another EU country, you must present the goods and the refund document to the customs authorities of that country.
(c) Leaving the EU on a through (transit) flight via another EU airport:
There are special rules for goods being carried on through flights leaving via another EU airport:
- hand baggage - goods carried as hand baggage must be produced with the refund document to customs in the last EU airport before leaving to return home
- hold baggage - goods carried as hold baggage must be produced with the refund document to UK customs before you check in your baggage
7.5.3 What to do if there is no customs presence
In most cases you will be able to locate a customs officer to stamp your refund document. However, some ports and airports do not have a 24-hour customs presence and at others the customs export offices are open only when there are departures for immediate destinations outside the EU. At such places there will either be a telephone to speak to customs or a clearly marked post box to deposit your refund document.
You must ensure that your refund document is fully completed and that the reply paid envelope is not sealed before it is placed in the deposit box. Customs will collect it and if satisfied that all the conditions of the scheme have been met, they will stamp it and send it to the retailer or refund company to arrange your refund.
Remember, if you’re travelling to an EU airport where you will transfer to a flight out of the EU, you must produce the goods carried in your hand baggage and the refund form to customs at the last point of transfer before departure from the EU.
The next sentence has force of law.
There is no facility to have your refund document stamped in your country of destination.
7.5.4 Making a declaration to customs when you present the VAT refund document to the customs officer
You’re making a declaration that:
- you’re eligible to use the scheme
- that all the goods shown on the document are being exported from the EU by you
It is a very serious offence to make a false declaration. This may involve you missing your flight or sailing and the misdeclared goods may be seized and penalties imposed.
7.5.5 What to do if you decide not to export all of the goods bought under the scheme
If you decide to leave goods bought under the scheme in the EU, you must clearly delete those items from any VAT refund document for certification when you finally leave the EU. This amendment must be made before you present the VAT refund document and the remaining goods to customs for examination and stamping. The VAT refund document must show only the items being exported.
7.5.6 What happens if you cannot produce the goods or get the VAT refund document stamped before you leave the EU
You will not receive any refund of VAT. If, however, you cannot produce the goods because, for example, your baggage has been lost or mislaid, you must tell the customs officer at the port or airport of departure from the EU. The officer will tell you what action to take.
Your refund document must be stamped by a customs officer when you leave the EU. Certification by anyone other than an EU customs officer when you leave the EU is not acceptable. Long queues at the airport will not be accepted as a reason for not getting a UK or EU customs stamp on the form. Forms stamped outside the EU are not acceptable.
7.6 Obtain your refund
Methods for the payment of refunds are set out at paragraphs 7.6.1 and 7.6.2. Whichever method is used, it should have been agreed between you and the retailer when you bought the goods.
Your refund may be reduced by an administration charge. This charge should be clearly shown on your refund document.
If you do not receive your refund within a reasonable time you should write to the retailer - not to HMRC.
7.6.1 How do you obtain your refund
After your VAT refund document has been stamped and returned to you by customs you can either post the refund document back to:
- the retailer to arrange payment of your refund
- a VAT refund company to arrange payment of your refund
7.6.2 Can you obtain a cash refund at the airport
Not all retailers and airports offer this ‘Cash service’. The retailer will advise you whether a cash refund is available. In such circumstances you’ll be advised to hand your refund document to a cash refund booth to arrange immediate payment.
The refund document will be passed to customs by the cash refund booth. After stamping by customs the form is sent to the retailer or refund company as evidence that the goods have been exported.
7.7 Lost refund documents
7.7.1 What you should do if you have lost the VAT refund document before stamping
If the refund document is lost before stamping you should ask the retailer to provide a duplicate document. This must be clearly headed up ‘duplicate’. Produce the duplicate document with the goods to the customs export officer when you leave the EU. If you find the original refund document later - destroy it.
7.7.2 What you should do if the VAT refund document is lost after stamping
If the refund document is lost after stamping, unless you can produce a photocopy of the stamped refund document you will not receive a refund of VAT. If, however, you can provide a photocopy of the VAT refund document stamped by customs at your final departure point from the EU, you can return this to the retailer and ask for a duplicate refund form to be issued and sent for stamping to the original customs office. The document must be clearly headed up ‘duplicate’.
7.8 What you should do if you bring the goods back into the EU
If the goods are brought back into the EU at any time they must be declared to customs in the importing EU member state - unless they are within the duty or tax-free traveller’s allowance limits of that member state.
However, if you purchased goods as an entitled EU resident (see paragraph 2.4.3) or as a student or migrant worker (see paragraph 2.4.2) and re-import them within 12 months of your departure from the EU, duty and tax free allowances will not apply to the goods as you will have failed to remain outside the EU for at least 12 months. You will have to pay any import duties, including VAT that are due.
8. Intra EU cruises - special arrangement
8.1 The purpose of a special arrangement
Non-EU passengers on wholly intra EU cruises may not have access to their luggage and purchases made under the VAT Retail Export Scheme from disembarkation until they arrive at their final non-EU destination. They cannot, therefore, produce their goods and VAT refund document to the customs officer for stamping at their point of final departure from the EU.
Therefore, for wholly intra EU cruises which commence within the UK and where the final port of disembarkation is also within the UK, a special arrangement was introduced on 1 July 2003.
8.2 The definition of a ‘special arrangement’
8.2.1 Individual purchases below £1,000
Cruise operators may produce an omnibus bulk refund document for all eligible goods, below £1,000 per item, purchased on board by entitled individual passengers.
The omnibus refund document must accompany the individual passenger’s luggage to the airport of departure.
If satisfied the customs officer will stamp the bulk refund form and return it to the cruise operator. On receipt of the certified bulk refund form, the cruise operator must account for the sales in their VAT records, as explained in section 5.
The next sentence has force of law.
However, the cruise operator must account for VAT on any goods on the bulk refund form not exported from the EU within the prescribed limits
8.2.2 Bulk refund documents
The format of the bulk refund document must be approved beforehand by customs. (See paragraph 4.6 for details.)
It must be clearly headed ‘Retail export scheme’ and must only include those goods that:
- were sold on board the vessel
- are eligible to be supplied under the VAT Retail Export Scheme (see paragraph 2.6)
- were supplied to entitled customers (see paragraph 2.4)
It must also give the following details:
- your name, address and VAT registration number
- your customer’s name and usual address
- your customer’s passport number and country of issue
- a description which clearly identifies the goods and the quantity involved
- the amount payable per item (where this includes VAT, the amount payable inclusive of VAT and the amount of VAT included in the total price should be shown)
In addition, it must include a retailer declaration as stipulated on the form VAT407 signed by a responsible ship’s officer, and a separate box not less than 5 centimetres by 3.5 centimetres for official certification by HMRC.
8.2.3 Individual purchases £1,000 and above
The normal VAT407 form or equivalent (see paragraph 4.1) must be completed for purchases of £1,000 or more per item. The customer must produce the goods and the form for stamping to the customs officer at the point of final departure from the EU.
9. Fiscal (VAT) territory of the EU
9.1 Countries and territories within the EU fiscal (VAT) area
You can find a list of EU countries at Countries in the EU.
9.2 Countries and territories outside the EU fiscal (VAT) area
The following countries and territories are outside the EU fiscal (VAT) area:
- The Channel Islands
- San Marino
- The Aland Islands
- The Canary Islands
- The overseas departments of France (Guadeloupe, Martinique, Réunion, St Pierre and Miquelon and French Guiana)
- Mount Athos
- The Vatican City
If you need more information on the VAT territory of the EU, please contact the VAT: general enquiries helpline.
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