VAT on exports out of the EU question

[Evoluzione]

We remove the VAT for overseas customers outside of the EU, the money generally comes from the Country where the goods are exported to so this is no problem as we have two methods of proof as to where the items went and the money coming from the same place.

I have a customer who wants to buy from outside the EU (where I will send the items), but says the money to pay for it will come to me from a British source.
Where do you think I stand on this as far as HMRC are concerned?

[Eric Mc]

So, you are being paid by a different entity to that which you are billing?

[Burrito]

We just had a VAT inspection and they only wanted to see proof of export. They were satisfied with AWB documentation and certainly didn't ask for proof the payment was from outside the EU.

These were all relatively small transaction values mind.

[Evoluzione]

Eric Mc said:

So, you are being paid by a different entity to that which you are billing?

You're probably thinking this looks a bit suspicious (as am I). He's telling me that the money is coming from a friend in the uk who he'll then reimburse. It doesn't sound great, even less so now it's written down, but i'm unsure where I stand. I don't want to turn down the business, but thinking that if it turns out I can't take the VAT off it may give me some reason to renegotiate.
There is certainly no chance anything will be sent until it's paid for in full, but I didn't want to come unstuck on the VAT at a later date. As long as i've got the cash and he's got his goods that's all I need to know I suppose.

[davepoth]

Evoluzione said:

Eric Mc said:

So, you are being paid by a different entity to that which you are billing?

As long as i've got the cash and he's got his goods that's all I need to know I suppose.

No, that's definitely not all you need to know.

HMRC will require you to furnish them with proof of export for any shipment where you are zero-rating for export.

This proof of export should be copies of the shipping documentation, ideally (but not necessarily) including a copy of the export declaration. If your customer is buying on ex-works terms I would be more inclined to ask for the export declaration because you don't have a relationship with the freight company - if the goods cannot be proven to have left the EU within three months you are supposed to charge your customer VAT, even if they are intending to ship them.

Proof that the money came from outside of the EU is not proof that the goods were supplied to a location that is outside of the EU.

A lot of countries that depend on oil are having a lot of trouble with foreign exchange at the moment due to the low price, which may be driving this method of payment.

Edited by davepoth on Sunday 7th February 01:03

[Evoluzione]

davepoth said:

Evoluzione said:

Eric Mc said:

So, you are being paid by a different entity to that which you are billing?

As long as i've got the cash and he's got his goods that's all I need to know I suppose.

No, that's definitely not all you need to know.

HMRC will require you to furnish them with proof of export for any shipment where you are zero-rating for export.

This proof of export should be copies of the shipping documentation, ideally (but not necessarily) including a copy of the export declaration. If your customer is buying on ex-works terms I would be more inclined to ask for the export declaration because you don't have a relationship with the freight company - if the goods cannot be proven to have left the EU within three months you are supposed to charge your customer VAT, even if they are intending to ship them.

Proof that the money came from outside of the EU is not proof that the goods were supplied to a location that is outside of the EU.

A lot of countries that depend on oil are having a lot of trouble with foreign exchange at the moment due to the low price, which may be driving this method of payment.

Edited by davepoth on Sunday 7th February 01:03

I was talking from my perspective of where the money is coming from and it looking a bit questionable as to why it's being done that way, but what you have written there at the bottom rings a bell, I think he wants to delay payment from him (but not to me) due to currency fluctuations.

Thanks all for the replies, we do keep all shipping docs, so looks like i'll be ok regardless of where the money comes from.
The three month rule is something worth noting too as it could affect me with some of the jobs I do.

[MrJuice]

What if you are shipping a pair of shoes, for example? You're unlikely to have export documentation from some freight handler. You'll merely have a postage label that says address, outside EU with date and details of the service you used to post.

[Evoluzione]

MrJuice said:

What if you are shipping a pair of shoes, for example? You're unlikely to have export documentation from some freight handler. You'll merely have a postage label that says address, outside EU with date and details of the service you used to post.

I can't think of any service which does not provide receipts/invoices and the relevant documentation to the user shipping within or outside of the EU and I ship Worldwide on a daily basis.

[MrJuice]

Evoluzione said:

I can't think of any service which does not provide receipts/invoices and the relevant documentation to the user shipping within or outside of the EU and I ship Worldwide on a daily basis.

Sure, but does that pass the VAT man test?

[Evoluzione]

MrJuice said:

Evoluzione said:

I can't think of any service which does not provide receipts/invoices and the relevant documentation to the user shipping within or outside of the EU and I ship Worldwide on a daily basis.

Sure, but does that pass the VAT man test?

Yes why not? If you have documentation provided by them which states all the facts I can't imagine why it wouldn't.
The only way you can run into trouble is if you've taken X amount in payment and not declared that same amount on the forms.