My client runs a shop, specialising in upcoming British designers. Increasingly she is getting overseas customers who are insistent that she should not charge them VAT. However, she is concerned that she has no proof the goods will ever leave the UK. What options are open to her?
You are correct that generally to zero-rate an export of goods to a destination outside the EU, commercial evidence of export is required. Clearly this is not necessarily easily obtained if a retail customer leaves the premises with the goods.
Your client may wish to consider using the VAT Retail Export Scheme to boost overseas sales to non-EU residents. This is an optional scheme but its use is widespread by retailers in tourist destinations and is usually advertised as “Tax Free Shopping”. Provided the customer is entitled to use the scheme to purchase eligible goods, the client will charge VAT at the time of purchase and fill in the refund form 407 in conjunction with the overseas customer. The customer will then get the form stamped by the Customs representative at the point of departure from the EU, which should be no later than 3 months from the date of purchase. The stamped form is then sent back to the retailer/client as proof of export. The VAT can then be refunded and the sale treated as zero-rated.
Details of both customer and goods eligibility are outlined in VAT Notice 704: (https://www.gov.uk/government/publications/vat-notice-704-vat-retail-exports/vat-notice-704-vat-retail-exports) and the forms can be obtained from HMRC.
Alternatively, the client can create their own version but it must be approved by HMRC. Some businesses use the services of a third party refund company to administer the process on their behalf and those companies will usually provide an officially approved version of the refund form.
Following Brexit the opportunities for Tax Free Shopping will increase so it may be worth your client familiarising herself with the process.