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Handling VAT when trading internationally

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International trade can be a great way to improve your business performance. There are many things to consider, including sourcing suppliers, securing finance and handling deliveries.

International trade is big business. UK businesses make exports totalling almost £40 billion a month, and total imports are even higher.

However, we understand that many businesses worry about the red tape associated with international trade. But there’s no reason to let that hold you back. Putting the right systems in place can;

  • help exploit the opportunities that international trade offers,
  • ensure you comply with VAT requirements, and
  • make you more attractive to overseas customers and suppliers you want to work with.

Selling internationally: Exports and dispatches

The way you deal with VAT in international trade depends on who your customers and suppliers are, and whether they are within the EU or in another country.

Sales to overseas customers can be treated in three different ways:

  • For sales within the EU to individual consumers, or to businesses that aren’t registered for VAT, you charge VAT in the usual way.
  • For sales within the EU to VAT-registered businesses, you can usually zero-rate the sale. You need to keep a record of each customer’s VAT number.
  • Exports to customers outside the EU are usually zero-rated. You need to keep proof that the goods have been exported.

As with UK sales, the value of your exports and any VAT charged on them is included in your VAT return. You’ll also need to give HMRC some extra details on your sales to VAT-registered businesses in the EU.

Buying internationally: Imports and acquisitions

The way you deal with purchases from overseas suppliers also depends on whether they are within the EU:

  • EU suppliers will normally zero-rate their sales to you if you provide your VAT number. Although you are liable for VAT at the usual UK rate, you can also reclaim that VAT in the same way as for other business purchases.
  • For purchases from outside the EU, you pay VAT at the usual rate plus any additional import duty to clear the goods through customs.
  • HMRC approved accounting software such as Sage accounts software can produce the details needed in your VAT return, along with any extra information required by HMRC.


Small business guide to VAT

Managing VAT can be a pain for many small businesses - but it doesn't have to be! Everything you need to register and submit VAT and staying compliant is right here.

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