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HMRC internal manual

VAT Personal Exports: Retail Exports

HM Revenue & Customs
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Personal exports - retail exports: How the scheme works: The direct reclaim system

Some refund companies operate the VAT retail export scheme under the ‘direct reclaim system’. This system involves the following steps:

Step Action
1 The retailer contracts with a refund company to sell to it all the goods the retailer sells to travellers, from his retail outlets, under the VAT retail export scheme.
2 The retailer checks that the traveller is an entitled customer, that the goods are eligible for sale under the scheme, and that they will be exported by the due date.
3 The traveller and retailer complete the refund company’s approved variation of the VAT refund document. (For guidance on the invoicing requirements see VATRES3500). At this point the supply is taxable at the appropriate UK rate and VAT is charged.
4 The retailer:
  • sells the goods to the refund company and
  • accounts for the output VAT at the appropriate UK rate on this business-to-business sale made in the UK. The refund company recovers the VAT charged on the purchase from the retailer as its input VAT.    
      5 The refund company simultaneously sells the goods to the travellers.
At this point the supply is taxable at the appropriate UK rate, VAT has been charged, and output VAT is due from the refund company.    
  6 The goods and VAT refund document are taken by the traveller and subsequently presented to the customs officer at the final point of exit from the EC. If the customs checks are satisfactory, the VAT refund document is certified by the customs officer and returned to the traveller.
  7 When the refund company holds the certified VAT refund document and has refunded the VAT, the output tax may be adjusted to zero-rate the goods exported.

Note: It is the responsibility of the traveller to ensure:

  • the VAT refund document is certified by a Customs officer; and
  • the certified document is returned to the refund company.