Should I charge VAT on an export?

[hs]

Hi, hoping someone can clarify this for me.

We are a UK registered Ltd company, and our customer is a UK registered Ltd company.

We have just sold the customer a product which will be manufactured in Toronto, Canada. It will then be shipped directly to Saudi Arabia, not entering the UK.

We have generated the invoice in US Dollars, and understand how to invoice this showing net goods, VAT and the rate we’ve used.

However should we be charging VAT at all?

Thanks.

[Spidersong]

Hi,

VAT is applied to any supply that is made in the course or futherance of business where that supply is made in the UK by a taxable person, and which is not specifically exempt (VAT Act 1994 S4).

So is a supply by a UK to UK company in the UK if they sell goods which don’t enter the UK? S7 (2) of the Act says “if the supply of any goods does not involve their removal from or to the United Kingdom they shall be treated as supplied in the United Kingdom if they are in the United Kingdom and otherwise shall be treated as supplied outside the United Kingdom.” 
So goods not in UK and never coming to UK means no supply in the UK and therefore no UK VAT to apply.

See also the HMRC manual on this: https://www.gov.uk/hmrc-internal-manuals/vat-place-of-supply-goods/vatposg3300

There may of course be local tax implications in either Canada or Saudi Arabia, but in short; no, you won’t charge VAT

[Author]

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