As HMRCs jaunty video suggests, there are pitfalls to buying and selling goods abroad especially where VAT and duty are concerned
Probably the most important point is that there is a difference between buy and selling within the EC and outside. This issue is now event more pertinent because in the near future these lines are likely to become more blurred – but that’s probably a debate for another day.
What is the case now is that there are rules that relate to EU trade and rules with the rest of the world. As HMRC state, a little non partisan in my opinion, is that trade in the EC in respect of VAT is generally simpler, with less forms and tax to pay than trading outside. This is the sort of information if published by the ‘Remain’ camp period to 23rd April, may have changed the result. You have to wonder why this wasn’t on a ‘Remain’ election broadcast at the very least!
So what are the rules for trade in the EC now? Between EC VAT registered business the general rule is that VAT is not charged by the supplier, but instead is declared on behalf of the supplier by the customer on their VAT return. This has the benefit of avoiding a cash flow hit demanded by imports, which is good news for the customer. On the downside the supplier probably has more forms to complete – they still have to demonstrate that the goods have left the UK, and also have to complete an EC Sales list. If either the supplier or customer buy or sell in large numbers they are also likely to have to complete an intrastat form. Even so this is likely to be less burdensome than the forms required for imports and exports.
A peek at the rules for sales and purchases made to businesses outside the EC may well be a window into future requirements for ALL foreign supplies in few years, although I suspect not, once (if?) we invoke article 20 and start negotiations. No one wants add complications in their lives.
Trading outside of the EC for purchaser means mainly that VAT is charged on importation, which is then recovered via a certificate of VAT paid. A duty Deferent account can be set up, but there needs to be guarantees that VAT charged on imports will be paid, which invariably leads to increased costs. In many ways, exporting goods is simpler than in the EC, in that as long as the goods have left the EC there is no requirement to show that the customer is VAT registered before the supply can be zero rated. Against this is the requirements of various export documentation to accompany the goods.
Have a look at the video; for an HMRC production it really is rather good. It’s a shame that the (Caribbean?) background music cannot be removed, but we can’t have everything!
I would certainly never let the fear of VAT or duty put a business off from trading outside of the UK. Once procedures are put into place the process should be quite seamless, and businesses should see overseas trade as an opportunity. If you are thinking of moving into this area, watching the HMRC video is not a bad place to start.