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HMRC internal manual

VAT Small and Medium Enterprises Assurance Manual

Check on business activities: imports/exports and single market trading

Record on the EF summary screen, under business activities whether the trader imports and/or exports goods and/or services. Be aware of the frequency with which imports are not declared, or declared as non-business imports (especially high duty goods) and with which disposals are mis-described as exports.

Estimate the percentage of inputs and outputs which are imports and exports, and update EF accordingly.

NB: In 1993 the concept of acquisition/dispatches replaced importation/exportation as the taxable event for VAT purposes, in relation to supplies of goods within the European Community. Services are not affected although the value of goods must include related Freight and Insurance costs. Valid VAT registration number of EC Customers is required to support any zero-rating. VATSM Single Market and IVG-Intrastat should be consulted for details and control aspects. Officers should:

  • record on EF whether there is any intra EU trade;
  • check that the trader records such transactions correctly on VAT returns, declaring any acquisition tax due in box 2 and reclaiming it as input tax (after any necessary adjustments for partial exemption and/or non business apportionment). Check input tax evidence;
  • compare EU declarations on VAT returns, with data on the VIES system. Exact agreement may not be possible because of currency fluctuations, or differences in stagger. However, significant differences can indicate possible fraud, or of a lack of awareness of EU issues; and
  • check that zero rating of EU supplies is supported by evidence of removal, as well as checking via VIES the validity of the EU customers VRN.