Retail export scheme

By Tolley

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

  • Retail export scheme
  • Background
  • Conditions for using the scheme
  • Procedure for dealing with a retail export
  • How to complete a form VAT 407
  • What happens if the customer does not export all of the goods listed?
  • Making the VAT refund
  • Margin scheme supplies
  • Lost documentation
  • Handling or administration charges
  • Can retailers allow customers to use the scheme for historical purchases?


The Government announced in Autumn Statement 2016 that it intends to provide funding that will be used to fully digitise the Retail Export Scheme in order to reduce the administrative burden currently faced by travellers making a refund claim.

SI 1995/2518, Regs 117(4), 117(7A)-(7D), 131(1); Notice 704 ; De Voil Indirect Tax Service, V4.331 (subscription sensitive); 2006/112/EC , Articles 131, 147; VATA 1994, s 30(8), (10); VATRES1000

This guidance note provides an overview of the zero-rated provisions applicable to goods sold by VAT registered retailers to eligible people resident outside of the UK for personal use and exported as accompanied baggage. In particular, it sets out the conditions that must be complied with by retailers and customers entitled to use the VAT Retail Export Scheme. The VAT retail export scheme provides overseas visitors coming to the UK with the opportunity to receive a refund of VAT paid on goods they buy in shops, as long as the goods are exported to destinations outside the EU.

The onus is on the retailer to ensure that export evidence is held to support zero-rating of the goods. If this evidence is missing or unacceptable, then HMRC will treat the goods as being supplied in the UK and the retailer will be issued with an assessment for the VAT under-declared plus interest and a penalty if applicable.

In order to qualify to use the scheme, the overseas customer must leave the UK for a final destination outside the EU (with the goods in question) by the last day of the third month following that in which the goods were purchased.

The retail export scheme is optional for a retailer. However, it gives two main advantages:

  • reduced prices for eligible customers who can buy goods on

More on Selling goods to overseas countries: