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HMRC internal manual

VAT Export and Removal of Goods from the UK

HM Revenue & Customs
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Assurance procedures: What to look for under direct and indirect exports

The definition of direct and indirect exports is given in Notice 703 paragraphs 2.10 and 2.11 and in VEXP20300. From an assurance viewpoint it is important to establish what the trader is doing. He may make only direct exports, only indirect exports or both.

If the trader is making direct exports it means that he (or an agent or freight forwarder acting on his behalf) is making the arrangements for transporting the goods out of the EC and as a result should have no problems in obtaining either official or commercial evidence of export. For example an invoice from a freight forwarder for the transport of the goods which gives details of the physical export of the goods is good commercial evidence of export, provided this information can be linked to the trader’s accounting records.

With indirect exports it is the trader’s customer who is making the arrangements for transporting the goods out for the EC. Consequently it will be the customer or his agent who will have the evidence of export. This can make it difficult for the trader to obtain the evidence but the onus is on him to ensure that he is aware of what evidence of export will be sent to him in order that he can zero-rate the transaction before he makes the supply. If he has any doubts about obtaining the evidence he can ask the customer for a deposit equivalent to the VAT which is potentially at stake.

This type of transaction provides the greater risk for assurance purposes because the UK supplier effectively loses control of the goods once they leave his premises.