Did you know that UK exports of goods and services reached over £600 billion in 2023? For small businesses trading internationally, understanding VAT on cross-border sales is crucial to staying compliant and competitive. Since Brexit, VAT rules for exports, imports, and sales to the EU have changed significantly, affecting how you charge VAT, reclaim input tax, and handle import duties.
| Transaction Type | VAT Treatment | Thresholds / Key Figures (2026/26) | Relevant HMRC Reference |
|---|---|---|---|
| Exports outside UK | Zero-rated for VAT | N/A | HMRC VAT Notice 700/12 |
| Imports into UK | Import VAT payable, reclaimable if VAT registered | Low-value consignment relief removed (goods ≤ £135 now subject to VAT) | HMRC VAT Notice 703/1 |
| Sales to EU consumers | Use OSS scheme or register in each EU country | Distance selling threshold abolished; all sales subject to VAT at destination | HMRC VAT Notice 725 |
| Sales to EU businesses | Zero-rated with valid VAT number (reverse charge applies) | Ensure customer is VAT registered in EU | HMRC VAT Notice 700/12 |
Exports of UK Goods: Zero-Rating Explained
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Use Free VAT Calculator →When you sell goods from the UK to customers outside the UK, these sales are generally zero-rated for VAT. This means you charge VAT at 0% and can still reclaim VAT on related expenses, reducing your VAT liability. However, to apply zero-rating, you must keep proof that goods have left the UK — such as commercial transport documents or export declarations.
It’s important to note that zero-rating applies only if the goods physically leave the UK. If you supply goods that remain within the UK or Northern Ireland, normal VAT rules apply.
For services exported outside the UK, the VAT treatment depends on the type of service and the customer's location, so check HMRC guidance carefully.
Import VAT on Goods into the UK
Since 1 January 2021, the UK fully controls VAT and customs duties on imports post-Brexit. Import VAT is payable on all goods brought into the UK, including low-value consignments under £135, which were previously exempt (Low Value Consignment Relief).
As a VAT-registered business, you can usually reclaim import VAT on your VAT return, provided you keep the relevant import documentation such as the C79 certificate or import VAT statement.
Practical Steps to Manage Import VAT
- Register for VAT if you haven’t already — this allows you to reclaim import VAT.
- Ensure your customs declarations are accurate and timely to avoid delays or penalties.
- Keep all import documentation, including invoices, bills of lading, and C79 certificates.
- Use postponed VAT accounting to defer import VAT payment until your VAT return.
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Selling to EU Consumers: VAT Changes Post-Brexit
Post-Brexit, UK businesses selling goods or digital services to consumers (private individuals) in the EU must charge VAT at the rate applicable in the customer’s EU country. The former EU distance selling thresholds have been abolished, so all sales are subject to VAT in the destination country regardless of turnover.
To simplify VAT obligations, UK businesses can use the One-Stop Shop (OSS) scheme. OSS allows you to register in one EU member state and report all EU consumer sales VAT through a single quarterly return, rather than registering in every EU country where you have customers.
Alternatively, you can register for VAT individually in each EU country where you make sales, but this is typically more complex and costly.
Selling to EU VAT-Registered Businesses
If you sell goods or services to VAT-registered businesses in the EU, these supplies are usually zero-rated for UK VAT provided you obtain and verify the customer’s valid EU VAT number. The customer accounts for VAT under the reverse charge mechanism in their own country.
It’s essential to keep evidence that the customer is VAT-registered in the EU and to record their VAT number on your invoices. You should also keep documentation to prove goods have been dispatched to the EU.
Accounting and Record-Keeping for International VAT
Maintaining clear and accurate records is critical when dealing with international sales and VAT. HMRC requires businesses to keep evidence of exports, imports, and EU sales for at least six years.
For exports, acceptable evidence includes commercial transport documentation or export declarations. For imports, retain import VAT certificates (C79s) and customs paperwork. When using the OSS scheme, keep copies of all OSS returns and related invoices.
- Always verify EU VAT numbers using the VIES system to avoid penalties.
- Keep copies of contracts, purchase orders, and invoices to support your VAT treatment.
- Regularly review your VAT registrations and thresholds to ensure compliance.
- Consider consulting a VAT specialist or accountant if you trade extensively across borders.
- Exports outside the UK are zero-rated for VAT but require proof of export.
- Import VAT applies to all goods entering the UK; VAT-registered businesses can reclaim this.
- Sales to EU consumers require VAT at the customer's country rate, often reported via the OSS scheme.
- Sales to EU VAT-registered businesses are zero-rated with valid VAT numbers and reverse charge applies.
- Keep thorough records and evidence for all international sales and purchases for HMRC compliance.
Do I need to register for VAT in each EU country where I sell goods?
Not necessarily. You can use the EU One-Stop Shop (OSS) scheme to simplify VAT reporting for sales to EU consumers, avoiding the need to register in multiple countries. However, if you prefer or if your sales are to EU businesses, different rules may apply.
Can I reclaim import VAT on goods I bring into the UK?
Yes, if you are VAT registered in the UK, you can usually reclaim import VAT on your next VAT return. You must keep valid import documentation such as C79 certificates to support your claim.
What evidence do I need to zero-rate exports?
To zero-rate exports, you must have proof that the goods have left the UK. This can include commercial transport documents, export declarations, or other official evidence demonstrating the goods were dispatched to a destination outside the UK.
Official Sources
* GOV.UK: Set up a business · * HMRC: Income Tax rates · * HMRC: Corporation Tax · * HMRC: VAT registration