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Nicola-mod, Moderator
Category: Tax
Satisfied Customers: 21
Experience:  Moderator
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Vat reclaim

Customer Question

A customer has bought over £2,500’s worth of stock from us in the past month to send out to his brother in Dubai who pays him for it. He has rung me several times to ask about getting the right HMRC VAT reclaim form for the goods as he believes that he can claim the VAT back for something he has sent out of Europe. Is there a form he can fill in to reclaim, or should we do something?

Submitted: 4 years ago.
Category: Tax
Expert:  TaxRobin replied 4 years ago.
For VAT purposes a direct export occurs when you, the supplier, send goods to a destination outside the EC, and you are responsible either for arranging the transport yourself or appointing a freight agent.
An indirect export occurs when your overseas customer or their agent collects or arranges for the collection of the goods from you the supplier within the UK and then takes them outside the EC.
If you are not directly selling to the brother you would not zero rate the sale. You must not zero-rate a direct export where you allow the goods to be collected by or on behalf of your customer even if it is claimed they are for subsequent export.
If the brother is VAT registered then he would handle that himself.

If your true customer is the brother in Dubai then you could zero rate the VAT if your overseas customer arranges for the export of the goods outside the EC provided all the conditions are met to do that.
The HMRC has outlined the conditions but here they are :
overseas customer:
exports the goods from the EC within the specified time limits (see paragraph 3.5), and
obtains and gives you valid official or commercial evidence of export as appropriate (see paragraphs 6.2 and 6.3) within the specified time limits,
and you:

keep supplementary evidence of export transactions (see paragraph 6.4), and
comply with the law and the conditions of this notice,
and the goods are not used between the time of leaving your premises and export, except where specifically authorised elsewhere in this notice or any other VAT notice.

Again though the HMRC advises "You must not zero-rate an indirect export where the goods are:

supplied to a private individual who is resident in the UK, or
supplied to a business registered for VAT in the UK (including an overseas business that has a place of business in the UK from which taxable supplies are made), or
delivered to, or collected by, a UK customer at a UK address."

So if the brother is not VAT registered and is in the UK he cannot reclaim the VAT.

The situation must be closely defined in the rules for paying VAT and if they do not meet all then he cannot reclaim and you should not zero rate and refund.
Expert:  Nicola-mod replied 4 years ago.

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