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If you occasionally have customers wanting to buy vehicles to take overseas you will be aware that the sales can be made free of VAT in certain circumstances.
With restrictions in travel due to the pandemic, these sales have declined over the last 12 months but we are now starting to see an uptick in interest.
These sorts of sales have always involved a VAT risk, as if you don’t follow the exact procedures and obtain the exact documentation required to support zero rating, HMRC will collect any lost VAT from you.
There are several forms the zero rating can take, but my recommendation is to use something called the Personal Export Scheme where ever possible. The reason for this is that it is one of those rare times where HMRC will tell you what the VAT liability of the supply will be, which then eliminates your VAT risk.
The scheme involves a number of eligibility criteria in relation to the customer and the vehicle and these can be found in VAT Notice 707. In recent weeks the conditions have been updated, so even if you have used the scheme in the past you should check section 8.4 of the revised notice to ensure your understanding of the scheme is still correct.
Another extremely useful development is that the VAT410 form which must be completed as part of the application for zero rating is now available online. Up until now you could only obtain copies of the form by ringing HMRC, which could sometimes be a problem if you needed a quick turnaround on the application. A link to the online form can be found here https://www.gov.uk/government/publications/apply-to-buy-a-motor-vehicle-for-export-from-the-uk
The VAT treatment of overseas transactions has always been complex and this has only worsened with Brexit. You might think that if you don’t sell vehicles abroad you have no need to worry, but you might still ship smaller items like parts outside the UK which means you will still be affected by the VAT export rules.
If you would like to talk through how you approach these types of sales then please get in contact with me at email@example.com.
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