VAT News

Export Evidence Challenge from HMRC – Protect your company’s position

14.04.2014

They do say that when you get more than one anecdotal story on an issue then that information ceases to be anecdotal and becomes statistical evidence to support a view. Therefore I think we are at the stage now of being able to say that the evidence is building that HMRC, particularly in South Wales, is paying particular attention to the proof of export evidence retained within exporting businesses.

Having spent 30 years in VAT this year I can confirm that this is an issue that has popped up repeatedly over that period. As the export of goods out of the UK allows a zero rate of VAT to apply to the sale, HMRC are going to be very keen to ensure that the exporter can clearly demonstrate that the goods have genuinely left the UK’s shores.

With the drive to exports being encouraged by all types of government agencies and a variety of support available to businesses to develop overseas markets, it is vital to ensure that the business processes for managing VAT compliance do not get left behind in the push for revenue growth.

The pain of an investigation from HMRC into export evidence translates not just into staff management time in terms of handling the questions. It also eats into managing oversea clients relationships if you need to engage with them, post the export event, to secure the evidence HMRC require of you – heightened further if you try to recover VAT not originally charged to them if the evidence is not forthcoming.

Add to these the actual financial cost of paying VAT assessments for the VAT charge HMRC feel you owe, where the goods concerned do not have the appropriate evidence and the addition of interest charges and penalties and it’s not difficult to understand how significant VAT assessments have resulted.

The evidence we have gathered on this issue arises from the series of VAT & Exporting courses we have run over the last 6 months as well as from accountancy firms with exporters in their client base and I’m sure that we will hear further examples at the next Export course on the 7th May:http://www.centurionvat.com/training/exporting-goods-and-services-vat-implications1/

To date the issue has concentrated on the export of goods - but with the place of supply rules changing for services again on 1 Jan 2015 I would not dismiss the service provision area as we go forward.

Exports of goods tend to fall into two types: Direct Exports – where the supplier is responsible for the shipment of their goods out of the UK and Indirect Exports - where your customer or agent collects the goods from you. Often it is this latter route which is more exposed to risk when trying to manage the export evidence. The time limits are quite strict as well for obtaining the evidence that the goods, from both types of exports, have left the UK and that is three months from the date of the supply being made.

It is important to manage the collection of evidence but it’s also as important to ensure that you have some safeguards in place, in contractual terms, with your overseas customers should they fail to comply with an action that exposes you to VAT assessment and penalty from your visiting VAT Inspector.

The message I believe is clear: HMRC regard the export of goods out of the UK as an area of significant risk to VAT revenues and exporters of any scale should expect their export evidence gathering processes to receive particular attention from a visiting HMRC officer.