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HMRC internal manual

VAT Fraud

HM Revenue & Customs
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Basic interventions: output tax interventions: refusing zero rating of dispatches and exports where there is connection with fraud: basic conditions

The basic conditions for zero-rating exports are contained in Notice 703, whilst Notice 725 provides the conditions for zero-rating intra-EU supplies (dispatches). There is also guidance contained in the VAT Export guidance manual.

Before deciding to refuse zero-rating of dispatches / exports you should read VEXP70400. It is also advisable to read VEXP90000 which deals with assessments and adjustments to disallow zero-rating.

If the fundamental conditions for zero-rating of dispatches/exports have been complied with, it may still be possible to challenge the zero-rating where:

  • there is evidence of fraudulent conduct on the part of the dispatcher/exporter (see the case of ‘R’ (VATF43220)); or
  • the dispatcher knew or should have known of a fraud committed by his customer (see the Mecsek principle (VATF43230)).