Treatment of imports and exports

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Exporting outside of the U.K.

  • The supply of goods is zero rated

  • The supply of services is outside of the scope of VAT

Illustration

A UK VAT registered trader supplies computers costing  £10,000 (VAT exclusive) to a company outside the U.K.

The supply will be treated as zero rated and therefore no output VAT will be charged. 

Whether the company outside of the UK is VAT registered or not does not matter, the supply will be treated as though it is zero rated.

Coming into the UK:

  • VAT must be accounted for on acquisition.

  • The VAT charge is declared on the return as output VAT but can be reclaimed as input VAT on the same VAT return.

    The UK trader accounts for output VAT as the goods would be standard rated if supplied in the UK.

    The UK trader can claim back input VAT of the same amount on the same return as the goods are used by a trader that only makes taxable supplies.

    The net effect on VAT payable is therefore nil.

  • The entries contra each other, therefore there is no actual VAT cost.

  • The only time that there is a VAT cost is if a business makes exempt supplies, since an exempt business cannot reclaim any input VAT.

Illustration

A UK company purchased computers costing £10,000 (VAT exclusive) from a company in the U.S.A.

The VAT of £2,000 will be accounted for but not paid. 

On receipt, the UK company will account for the £2,000 on its VAT return and can claim the £2,000 input VAT on the same VAT return.

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