Guidance

Zero rate tools that manufacture goods for export (VAT Notice 701/22)

Find out when to use the zero rate of VAT when supplying machine tools that stay in the UK but are used to manufacture goods for export.

Details

This notice cancels and replaces Notice 701/22 (October 2017). It applies to supplies made after the UK has departed from the European Union.

This notice applies to tools used in Great Britain for goods to be exported out of the UK and to tools used in Northern Ireland for goods to be exported out of the UK to non-EU destinations. References to UK should be construed accordingly.  

1. Zero rating machine tools used to manufacture goods for export

1.1 What this notice is about

This notice explains when you can zero rate supplies of machine tools that stay in the UK and when you cannot.

1.2 The UK law relating to machine tools

VAT Act 1994, Schedule 8, Group 13, Item 3 permits the zero-rating of: The supply to an overseas authority, overseas body or overseas trader of jigs, patterns, templates, dies, punches and similar machine tools used in the United Kingdom solely for the manufacture of goods for export to places.

1.3 About machine tools

Machine tools are goods used in the manufacture of other goods, for example, jigs, patterns, templates, dies, moulds, punches and similar tools.

1.4 When to zero rate your supplies

The supply of machine tools that stay in the UK, are normally standard-rated. You may be able to zero rate your supply if you meet the conditions for zero rating and you’ve used the tool to manufacture goods that are exported from the UK.

1.5 Supplying a machine tool

You will be supplying a machine tool when your customer specifically asks you to make it or buy it for them, and you use the machine tool to manufacture goods for the same customer and make a specific charge to them for the supply of the tool.

1.6 Conditions for zero rating machine tools

Your supply of the machine tool is zero-rated when all of the following conditions are met:

Condition Description
1 You supply the machine tool to an overseas authority or
an overseas body or
an overseas trader
2 You get a signed statement (or other similar definite evidence) from your customer that they are neither registered nor required to be registered for VAT in the UK
3 You use the machine tool for manufacturing goods that are exported from the UK
4 You hold commercial documentary evidence that the goods have been removed from the UK - see VAT Notice 703: export of goods from the UK

1.7 An overseas authority

An overseas authority means any country other than the UK or any part of, or place, in a country or the government of any such country, part or place.

1.8 An overseas body

An overseas body means a body established outside the UK.

1.9 An overseas trader

An overseas trader means a person who carries on a business and has his principal place of business outside the UK.

Your rights and obligations

Read Your Charter to find out what you can expect from HMRC and what we expect from you.

Help us improve this notice

If you have any feedback about this notice please email: customerexperience.indirecttaxes@hmrc.gsi.gov.uk.

You’ll need to include the full title of this notice. Do not include any personal or financial information like your VAT number.

If you need general help with this notice or have another VAT question you should phone our VAT helpline or make a VAT enquiry online.

Putting things right

If you are unhappy with HMRC’s service, contact the person or office you’ve been dealing with and they’ll try to put things right.

If you are still unhappy, find out how to complain to HMRC.

How HMRC uses your information

Find out how HMRC uses the information we hold about you.

Published 5 October 2017
Last updated 31 December 2020 + show all updates
  1. This page has been updated because the Brexit transition period has ended.

  2. First published.