Case Study 
A local machinery business sold an excavator to customer based in Slovenia. The customer planned to appoint a transport company to collect the machine from the UK and deliver it to Slovenia. The UK business wanted to know: 
• Do we need to charge VAT?
• Do we need to appoint a customs clearing agent?

VAT on exports
VAT is a tax on goods used in the UK. Business do not need to charge VAT if goods are exported outside the UK. Businesses can zero rate the sale, as long as they get and keep evidence of the export within 3 months from the time of sale. 

The time of sale is when you send the goods to your customer or receive full payment for them (whichever is earlier). Proof of export can be commercial or official evidence. If you do not get this evidence in time, you will have to account for the VAT on your return. 

If you use the National Export System, you’ll automatically get an electronic Goods Departed Message when the goods leave the UK. In addition to evidence that the goods have physically left, you’ll need to hold supplementary evidence, for example, within your accounting system, to show that a transaction has taken place. 

Customs responsibilities 
Now that the UK has left the EU and Single Market, new customs procedures are in place. Those exporting or receiving goods need to consider which Incoterms rule they trade under. These are standard sets of international trading terms and conditions. 

In this case study, the business was planning to export under the 'Ex Works’ rule. This would mean that the buyer was responsible both for export and import clearance. There are two issues with selling on an ExWorks basis:

• The first issue is that the UK exporter would need evidence of export. In an ExWorks contract, the buyer is not obliged to provide any proof of export and the export declaration required to get the goods out of the UK, would be made in the Slovenian company’s name. 

• The second issue, is that the Slovenian customer (or their Customs Agent) would need to prepare the export declaration for the goods to exit the UK. To do this they would need a UK EORI number which they may not have.

Instead, it was recommended that the business exported under the ‘Free Carrier’ rule which would mean that the seller delivers the goods, cleared for export, to the carrier nominated by the buyer at the named place.

Under this rule it would be the seller’s responsibility to get someone to do the UK export declaration using their EORI number. The seller then has evidence of export and can zero rate the invoice for VAT purposes. The Slovenian Customer can nominate their own freight forwarder. Their freight forwarder may also be able to arrange the export declaration. Alternatively, the seller could appoint a customs agent.

Further links and guidance
• For a guide to Incoterms and potential post-Brexit issues:
https://www.womblebonddickinson.com/sites/default/files/2018-11/Incoterms%20and%20Brexit.PDF

• Check that you have an EORI number: www.gov.uk/eori