When businesses export goods from the UK, the sale can be zero-rated. This means that you do not need to charge VAT on the goods exported, as they are not going to be used in the UK. To apply zero-rating to sales, then you need to fulfil specific criteria.
There are two categories for exporting goods. Direct exports are when the supplier or owner of the goods controls the whole transaction of the goods. This means that the supplier/owner sells the goods to a customer and arranges the export of the goods. If the destination is outside of the UK, then the sale can be zero-rated.
An indirect export is when an overseas customer arranges for the collection of goods from a supplier within the UK and takes the goods outside the UK. This type of export is not liable to the zero-rate if: is supplied for personal use; supplied to an individual that is a UK resident; or supplied to a business that operates within the UK. Therefore for goods to be able to apply for zero-rate if; the goods are exported within a specified timeframe; obtain and give the supplier valid evidence of the good being used commercially, and keep evidence of export transactions.
The evidence for export needs to consist of official or commercial evidence.
Official evidence can be:
A Goods Departed Message (GDM), is when goods are exported from the UK to a third country destination. These are created by the Nation Export System (NES), but are only accepted as evidence when the Input Customs Status (ICS) code = 60 and the Status of Entry is coded = 8.
A Certified Single Administrative Document (SAD)(Form C88) Copy 3. This will be stamped by Customs at the office of exit from the EU when goods are exported from Northern Ireland. This will change the ICS code on the GDM to = 61. This GDM will not be accepted unless it is supported by a stamped copy 3 SAD.
A confirmation from the New Community Transit System (NCTS) that the Community/Common Transit (CT) procedure has been discharged.
Commercial evidence will describe the physical movement of the exported goods such as authenticated sea waybills, authenticated air waybills, PIM/PIEX international consignment notes, etc.
HMRC also recommends that businesses should also obtain supplementary evidence. This can be insurance and freight charges documentation, a copy of the export sales invoice, a consignment note, etc.
All export evidence should be held for 6 years, physically or electronically. Please note that the sales invoice should have an accurate description of the exported goods, or it may not be accepted by HMRC.