Goods receiving a service in the UK before being exported

The general rule when a VAT-registered UK business sells goods to a TVA-registered French customer is that the sale can only be zero-rated for UK VAT purposes if the goods are physically exported from the UK. If the goods are not exported, generally UK VAT has to be charged at the applicable rate.

This can cause problems when goods sold to a French customer are first delivered to another UK business to carry out a service on them before they are finally exported to France, as it would result in the French customer being charged UK VAT which they will be unlikely to able to reclaim.

To allow for this, the first UK business can still zero-rate the sale to the French customer if these conditions are met:

  • The goods are only being delivered to the other UK business, and are not being sold to them; and
  • The French customer is registered for TVA; and
  • The UK business obtains a valid TVA registration number for the French customer and shows it (including the FR prefix) on the sales invoice; and
  • The goods are exported from the UK within 6 months; and
  • The UK business obtains and keeps documentary proof of export from the UK; and
  • No other use is made of the goods while they are in the UK; and
  • Full records are kept of the transaction and the movement of the goods.

The concession also applies where the goods are delivered to another UK location in order to be incorporated into some other goods for export from the UK.

As it is the UK business that will be liable to pay any UK VAT that should have been charged, in these cases the UK business should consider asking the French customer to pay a deposit equal to the UK VAT that would have to be paid if sufficient evidence of the removal of the goods cannot ultimately be produced. This deposit can be returned once sufficient evidence is received within the 6-month time limit.