Exports zero rated for VAT: Evidence of Export
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New and exisiting Exporters should be made aware of a specific risk of prosecution by HMRC arising in relation to the retention of export evidence, following a concerted and on-going campaign undertaken by HM Revenue and Customs (HMRC) who are concerned that businesses are not fulfilling their obligations in relation to the quality and retention of such export evidence.
As many of you will be aware, in order to treat an export as zero-rated for VAT purposes it is a requirement that the exporter retains sufficient documentation to prove that the goods have been physically removed from the UK. This evidence can constitute either ‘official’ or ‘commercial’ evidence and equal weight is put on these, but both must be supported by ‘supplementary’ evidence which can take a number of forms. It would appear that HMRC are successfully targeting exporters having identified that the evidence retained by a significant number of businesses often fall short of what is legally required to support zero-rating.
Faced with such a challenge the business has to then retrospectively try and obtain sufficient evidence to demonstrate that the goods have been exported. In our experience this usually results in the business having to divert a significant amount of resource and time to deal with this and inevitably it will not be possible to locate appropriate evidence for all exports. In these circumstances HMRC will look to assess for output VAT on the value of the supply on the basis that the business cannot prove that the goods have been exported. To add insult to injury HMRC may also seek to levy penalties of up to 30% of the VAT under declared were they believe the business has not taken reasonable care in managing its VAT affairs.
To minimise the risk of a HMRC challenge, businesses should consider carrying out a pre-emptive review focusing on their export procedures and more specifically the quality of the evidence which is retained to support zero rating.
Freedom Logistics routinely provides its customers with evidence of export on each shipment, but if you have any concerns that the evidence you retain falls short of what is required then please contact us for assurance. FREEPHONE 0800 012 4369 or email email@example.com