EU ― acceptable evidence of removal

By Tolley
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The following Value Added Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • EU ― acceptable evidence of removal
  • What sort of evidence can be used?
  • What information must be included on the evidence?
  • Evidence for removals from Northern Ireland to the Republic of Ireland
  • Evidence required if the customer collects the goods to be removed
  • Postal and couriers
  • Record retention period

It is extremely important that a business obtains and keeps acceptable evidence that the goods have been removed from the UK to another EU member state. If a business zero-rates a sale as an intra-EU dispatch and does not have proper evidence that the goods have been removed, HMRC will issue an assessment for the VAT due on the sale, plus interest and possibly penalties.

De Voil Indirect Tax Service V4.343 (subscription sensitive); VEXP70100; VATA 1994, s 30(8); SI 1995/2518, reg 134; De Voil Indirect Tax Service V4.306 (subscription sensitive)

From a commercial perspective, if the business zero rates the sale and does not get the necessary evidence, it is going to be difficult to persuade the customer to pay the VAT due on the transaction. If the business cannot recover the VAT due from the customer, it will need to treat the amount received from the customer as VAT inclusive and pay this VAT amount to HMRC. This will reduce the amount due to the business which could be detrimental to the business. Belatedly requesting VAT from a customer can also have a very damaging impact on the business’ relationship with the customer, even if the customer pays the VAT due.

If the customer is arranging shipment of the goods, it may be prudent for the supplier to request that the customer pays a deposit of the amount of VAT that would be due on the sale. The business can refund the amount if acceptable evidence is provided. Requesting a deposit is more likely to make the customer supply the evidence on a more timely basis as they have a financial incentive to do so.

Please see VEXP70300 for access to a number of VAT decisions regarding what evidence of removal is acceptable for zero rating. Businesses may also wish to study the CJEU decision in Teleos plc where the court stated

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