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HMRC internal manual

VAT Export and Removal of Goods from the UK

From:
HM Revenue & Customs
Published:
24 May 2016
Updated:
2 October 2026 - See all updates

VEXP20300 - Basic principles: Direct and indirect exports

For VAT, goods exported from the UK fall into two groups: direct exports and indirect exports. These words have a different meaning for Customs. You can read the Customs meanings in VEXP40300. Different VAT rules apply to each type of export.

Direct Exports

A direct export is when the UK supplier, controls the whole process from sale to export. It does not matter where the customer is based. The important point is that the supplier controls the export.

Section 30(6) of the VAT Act 1994 allows the supply to be zero-rated when HMRC is satisfied that the supplier: 

  • exported the goods; or shipped the goods for use as stores on a journey ending outside the UK, or
  • for retail sale to people travelling on that journey; and 
  • has met any other conditions set in regulations or by HMRC

Examples of direct exports include:

  • the UK supplier, or an agent working for the supplier, exports the goods; an agent could be a freight forwarder or courier, 
  • the UK supplier sends the goods by post, the UK supplier, or
  • the UK supplier or their agent, carries the goods as baggage and uses the Merchandise in Baggage (MIB) process

Goods bought for personal use

Goods sold to an overseas customer for personal use may be zero-rated if the UK supplier makes a direct export of the goods.

Indirect Exports

An indirect export occurs when an overseas customer, or their agent, collects the goods in the UK and takes them out of the UK. The customer may also arrange for another person to collect and export the goods on their behalf. These arrangements are referred to as “ex-works” transactions.

The supply can qualify for zero-rating if the customer is not established in the UK. This can still apply if the customer is registered for VAT in the UK.

The evidential requirements are heavier than for direct exports. See Chapter 6 of VAT notice 703. 

Examples of indirect exports include:

  • the overseas customer, or their agent, collects the goods in the UK and exports them as freight; the agent could be a freight forwarder,
  • the overseas customer or their agent carries the goods as baggage and uses the Merchandise in Baggage (MIB) process

These arrangements are often called “ex works” transactions.

Please note: Goods exported as indirect exports using the MIB process must be commercial goods to qualify for zero-rating. Commercial goods are goods that a business customer exports for a business reason. They are not goods for the customer’s personal use.

Goods bought for personal use

Goods sold to an overseas customer for personal use may be zero-rated if the customer arranges an indirect export through a freight forwarder or parcel operator. Personal-use goods cannot be zero-rated if the customer intends to export them in accompanied baggage.

Northern Ireland has a VAT Retail Export Scheme. Further guidance is available at https://www.gov.uk/guidance/retail-export-scheme-northern-ireland

VAT Regulations for Indirect Exports

Section 30(8) of the VAT Act 1994 allows regulations to set rules for zero-rating indirect exports. HMRC must be satisfied that the goods were, or will be, exported to an allowed destination. All other conditions set by the regulations or HMRC must also be met.

Great Britain

Regulation 129 of the VAT Regulations 1995 (SI 1995/2518) says that a supply can be zero-rated when all these conditions are met:

  • the goods were in Great Britain when they were supplied
  • the goods were intended for export outside Great Britain
  • the customer was a person not resident in Great Britain, a trader with no business establishment in Great Britain making taxable supplies, or an overseas authority 
  • the goods were exported outside Great Britain
  • the goods were not personal gifts as defined in regulation 2 of the Customs (Export) (EU Exit) Regulations 2019
  • all conditions in an HMRC notice, and any other conditions set by HMRC, were met

Northern Ireland

Regulation 133B of the VAT Regulations 1995 (SI 1995/2518) says that a supply can be zero-rated when all these conditions are met:

  • the goods were in Northern Ireland when they were supplied
  • the goods were intended for export outside the “relevant states”  
  • the customer was a person not resident in Northern Ireland, a trader with no business establishment in Northern Ireland making taxable supplies, or an overseas authority  
  • the goods were exported outside the relevant states
  • the goods were not personal gifts as defined in regulation 2 of the Customs (Export) (EU Exit) Regulations 2019 
  • all conditions in an HMRC notice, and any other conditions set by HMRC, were met

Guidance on movements of goods between Northern Ireland and the EU can be found in VAT Northern Ireland and the EU (VATNIEU)