12. UK businesses trading overseas. The cessation of the UK membership of the EU means that there will now be no di
ff
erence in the VAT
treatment for transactions between the UK and the EU and between the UK and the rest of the
world.
The VAT treatment of exports and imports must be appreciated on these transactions but for TX-UK
purposes only the following rules will be relevant.
12.1. Supply of goods ๏
Exports
‣
The supply of goods to all overseas countries is now zero rated.
๏
Imports
‣
Import VAT is accounted for on the VAT return that includes the date that the goods are
imported under the postponed accounting system.
‣
The import VAT is declared on this VAT return as output VAT, but may be reclaimed as
input VAT on the same VAT return so long as the business makes taxable supplies.
‣
This “reverse charge or self supply” procedure as it is known means that for most
businesses, there is no VAT cost because the output VAT and corresponding input VAT
are equal so that no VAT payment is required.
‣
This may seem like a pointless exercise but if the UK business makes exempt supplies it
will not be able to recover the input VAT and hence will incur the VAT cost.
‣
When the UK business subsequently sells such goods the normal VAT rules will apply.
12.2. Supply of Services ๏
To overseas business customer = outside scope of VAT.
๏
Service from an overseas business = Self supply / reverse charge system applies as for
imports above.
Example 8 BW Ltd a UK VAT registered UK business that makes only taxable supplies. It acquired £12,000 of
goods from its suppliers in the United States of America and £20,000 of goods from its supplier in
Germany in the quarter to 31 March 2023.
In the same VAT quarter BW Ltd made sales of £50,000 to a VAT registered customer in France and
£10,000 of goods to a business in Australia.
