Conditions for zero rating: Evidence of export
Acceptable evidence of export can be either official or commercial. For VAT purposes it is not mandatory to retain official evidence of export, therefore you can accept 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 EU.
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 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 Assurance procedures in VEXP110000 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).
Unsatisfactory or suspect evidence of export relied on in good faith
The Court of Justice of the European Union (CJEU) judgment in Teleos PLC [C-409/04] 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 EU 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.
Businesses may hold electronic documents as evidence of export or removal of goods and this will be considered satisfactory provided:
- the electronic information shows that the goods left the UK for destinations outside the EU;
- the electronic evidence is readily available to officers for inspection (see section 6 Notice 700/63); and
- the business satisfies the conditions for electronic storage in section 5 Notice 700/63.
Evidence cannot be said to be unsatisfactory because of the format of storage.
Meaning of “hold satisfactory evidence”
In this context, the term “hold” must be taken to be the time that the document came into existence and not when it was printed and in tangible form.
Contact the VAT, Export & Removals UoE (VEXP10600) if you encounter electronic evidence and need advice.