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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: Invoicing under the direct reclaim system

The EC Invoicing Directive was implemented on 1 January 2004 and changes introduced by that Directive impact on the direct reclaim system. The Directive is implemented in UK law at Regulation 14 of the VAT Regulations 1995. Businesses must ensure that they meet the new requirements by 31 December 2004.

Retailers operating the direct reclaim system must comply with invoicing requirements set down in law. Under the system, the retailer “sells” the goods to the refund company at the point of sale. At this point the retailer accounts for output tax on this supply to the refund company who reclaim the input tax. The retailer must produce an acceptable “VAT invoice” to provide evidence of the supply. If the retailer does not issue a separate VAT invoice for this transaction a copy of the refund company’s approved version of the VAT 407 can be used but it is essential that it includes specific details required by law. The details required depend on the value of the consideration for the supply.

Regulation 14 of the VAT Regulations 1995 lists the particulars which must be included. Where the consideration exceeds £250, the invoice or VAT 407 must contain all those particulars listed in regulation 14 of the VAT Regulations. The VAT 407 form does contain most of the particulars detailed in regulation 14 but there are a couple of notable omissions, for each description:

  • the taxable amount excluding VAT; and
  • the unit price.

Where the consideration for a supply is £250 or more, retailers may (provided the customer agrees) issue a modified VAT invoice showing the VAT inclusive amount instead of the VAT exclusive values. However, all other details as set out in regulation 14(1), such as the unit price, must be included. Information that must be shown is contained in Notice 700 in thesection headed ‘VAT invoices: general rules’.

We have no discretion to vary the invoicing requirements which originate in EC law. If these additional details are not included on the VAT 407 or separate invoice, the retailer may be liable to a civil penalty under section 69 of the VAT Act 1994.

However, regulation 16 allows for simplified invoices to be issued where the consideration does not exceed £250.