Conditions for zero-rating: Evidence of export
Evidence of export consists of two types, official and commercial. For VAT purposes there is no mandatory requirement to retain official evidence of export so equal emphasis should be placed on the acceptance of either official or commercial evidence to substantiate zero-rating. The official and commercial transport evidence must be supported by other supplementary documentation associated with the supply, such as the customer’s order, inter-company correspondence, despatch note, acknowledgement of receipt, evidence of payment, etc. Full details on the supplementary evidence required are in Notice 703 Export of goods from the United Kingdom. Taken together, the transport and supplementary evidence must show that
- a transaction has taken place and
- the goods have actually left the Community.
Official evidence is normally
- A Goods Departed Message (GDM) where the goods are exported directly out of the UK to a third country destination - see VEXP40400. The GDM is generated by the National Export System (NES) when electronic export declarations are processed. The GDM is only acceptable as export evidence when the Input Customs Status (ICS) code = 60 and the Status of Entry is coded = 8).
- A certified Single Administrative Document (SAD) (Form C88) Copy 3, stamped by Customs at the office of exit from the EC where the goods exit the EC from another member State. In this case the GDM will show an ICS code = 61 and is not acceptable as official evidence of export unless supported by the stamped copy 3 SAD.
- Confirmation from the New Community Transit System (NCTS) that the Community/Common Transit (CT) procedure has been discharged - see VEXP40500.
See Notice 703 Export of goods from the United Kingdom for further details about the evidence generated by NES and NCTS.
In addition, where an exporter subscribes to the MSS Data to the Trade Service, an MSS report showing ICS code 60 and Status of entry (SOE) code 8 is acceptable official evidence of export. The VAT Control Notes:assurance techniques provides further information about this service.
Commercial evidence comprises two types – primary (eg Master air waybills) and secondary (eg authenticated house air or sea waybills).
Notice 703 Export of goods from the United Kingdom includes details of acceptable commercial evidence. The VAT Control Notes:assurance techniques provides guidance on the checks which should be carried out on the evidence produced.
Unsatisfactory or suspect evidence of export relied on in good faith
The European Court of Justice (ECJ) ruling in Teleos PLC established that, in certain limited circumstances, a trader retains the right to zero-rate a supply even if evidence he has relied on in good faith turns out to be unsatisfactory. Although Teleos concerned an EC removal, the general principles read across to exports. The limited circumstances are
- at first sight the evidence relied on in good faith is consistent with the requirements set out in Notice 703 and
- we accept that the trader has taken every reasonable measure to ensure that his supply did not lead to his participation in evasion.
Vague assertions by a trader that he acted in good faith are not sufficient to retain the right to zero-rate. There is more information about the impact of the Teleos ruling at VEXP70400.