Tax free shopping for your customers

  • by Carole Jordan
  • 25 Sep, 2017
Tax free shopping for your customers retail export scheme brighton accountants and consultants business

Dealing with overseas customers and VAT rules can be a bit complicated for some businesses, particularly those in retail where you may not have proof that goods are leaving the UK.
Read below to find out more about the options available to your business.

Do you have to charge VAT to overseas customers?

You would be correct in thinking that you would zero-rate the goods sold to overseas customers, however you would need to provide proof that the goods sold left the EU. This may not be something that you can easily obtain in your retail business, but there is a Retail Export Scheme available for situations like this which may be of use to you. This scheme is usually advertised as “Tax Free Shopping” and so long as your customers are eligible for the scheme it could make your VAT life a lot easier.

What is Tax Free Shopping (Retail Export Scheme)?

The Retail Export Scheme means that you will charge the customer for the sale of the goods + VAT, and then fill in a refund form VAT 407 which you give to the customer. The VAT 407 form will need to be stamped by Customs when your customer leaves the country, and then the stamped form returned to you as proof of export. The VAT on the goods sold will then be refunded and the original sale now treated as zero-rated.

Which types of goods are eligible for Tax Free Shopping?

Zero-rated goods, such as books and children’s clothing are not eligible for obvious reasons. However, standard-rated goods and lower-rated goods can be sold under this scheme, with a few exceptions;

  • Motor vehicles
  • Boats
  • Goods over £600 (excluding VAT)
  • Goods exported as freight, or unaccompanied baggage
  • Goods that require an export licence
  • Unmounted gemstones
  • Bullion
  • Goods for consumption in the EU
  •  Goods purchased over the internet

Note that only goods and not services are eligible under this scheme.

For your customer to be eligible for this scheme they must;

  • Be considered either an; “Overseas Visitor”, “Overseas Visitor studying or working in the UK” or an “Entitled EC Resident” ( See HMRC publication for full definitions )
  • Leave the EU no later than 3 months from the date of the sale

With the changes we’ll be going through for Brexit , opportunities for the Retail Export Scheme & Tax Free Shopping will increase. So it will be worthwhile familiarising yourself with the rules and the process involved, so you can better see how your business could benefit from schemes such as this. As tax advisors we’re on hand to help you understand these processes, so if you would like to discuss this scheme in more depth then please give us a call on: 0123 882200.

We have a vast database of blogs on the topic of Tax and Exports, check out these links for more information:

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