A supply of goods exported from Great Britain to anywhere outside the UK, or from Northern Ireland to outside the UK and EU, can be zero rated only if the goods actually leave within the time limit and you obtain and keep valid evidence of export and evidence of supply. For most direct and indirect exports both limits are 3 months from the time of supply. If either condition is missed, you must account for VAT at the UK rate on the return for the period in which the time limit expires.
Where do the rules come from?
VAT Notice 703, paragraph 1.3, lists the law: section 30(6) of the VAT Act 1994 for direct exports, section 30(8) with regulations 129 and 133B of the VAT Regulations 1995 for indirect exports, and section 30(10) for what happens when the conditions are not met. Paragraph 1.4 explains that HMRC can set conditions to prevent evasion and abuse, and that some paragraphs of the notice have the force of law, including 3.3 (the conditions), 3.5 (the time limits), 3.7, 6.5 (what evidence must show) and 6.10 (duplicates). Those paragraphs are not guidance you can depart from with a reasonable alternative. They are the conditions.
Is it a direct or an indirect export?
The difference turns on who arranges the transport.
| Direct export (paragraph 2.8) | Indirect export (paragraph 2.9) | |
|---|---|---|
| Who arranges transport | You, the supplier, or a carrier or forwarder you appoint | The overseas customer or their agent, often on ex works terms |
| Who the customer can be | Any customer outside the UK | An overseas person only |
| Evidence risk | Lower, because your own carrier produces the paperwork | High, because the carrier works for the customer |
An overseas person, under paragraph 2.4, is someone not resident in the UK, a business with no UK establishment from which taxable supplies are made, or an overseas authority. A customer who is UK VAT registered but not established here can still qualify for indirect export zero rating. Paragraph 3.4 rules out zero rating an indirect export where the goods go to an overseas visitor for personal use in accompanied baggage, to a private individual resident in the UK, or to a customer with a UK place of business from which taxable supplies are made. Paragraph 2.10 adds that a UK established customer cannot receive a zero rated supply even if it is also an overseas person and arranges export straight from your premises, although zero rating is still possible if you arrange a direct export yourself. Goods must not be used between leaving your premises and export.
What are the time limits?
The table in paragraph 3.5 has the force of law. The time limits run from the time of supply, which for exports is usually the earlier of sending the goods or receiving full payment (paragraph 2.11).
| Type of export | Export goods within | Obtain evidence within |
|---|---|---|
| Direct and indirect exports | 3 months | 3 months |
| Groupage or consolidation before export | 3 months | 3 months |
| Exports through auctioneers | 3 months | 3 months |
| Goods processed or incorporated before export | 6 months | 6 months |
| Thoroughbred racehorses (Notice 700/57 conditions) | 6 months | 6 months |
A payment in advance therefore starts the clock early. If a customer pays in full in January and the goods ship in May, the 3 months may already have expired. Notice 703, paragraph 11.5, says deposits and progress payments can be zero rated if the final supply will be, but if the goods are not exported or evidence is not obtained you must account for VAT on the whole value including deposits. See also VAT on deposits and advance payments.
What evidence of export does HMRC accept?
Paragraph 6.1 says you need either official or commercial evidence of export, plus evidence that a supply took place.
- Official evidence (paragraph 6.2) is an export declaration in the Customs Declaration Service that has generated a departure confirmation, identified by its Movement Reference Number or Declaration Unique Consignment Reference. A discharged transit movement also counts.
- Commercial transport evidence (paragraph 6.3) includes authenticated sea or air waybills, bills of lading, certificates of shipment and fully completed CMR notes signed by consignor, haulier and consignee.
- Evidence of supply (paragraph 6.4) comes from your own records: orders, contracts, sales invoices, packing lists, freight and insurance documents and proof of payment.
Under paragraph 6.5, which has the force of law, the evidence taken together must give a clear audit trail identifying the supplier, the consignor if different, the customer, an accurate and full description and quantity of the goods, a consistent value, the destination, and the mode of transport and route. Vague or contradictory descriptions are not acceptable. Copies of transport documents alone are not enough for an indirect export.
Posted and couriered goods
For letter post, paragraph 7.6 accepts a certificate of posting such as form C&E132 or P326 stamped by the Post Office. Parcelforce exports need the customs declaration for each parcel plus the manifest or statement of account. For couriers, paragraph 7.7 accepts the invoice showing the air waybill number for each shipment, ideally with track and trace printouts. Untracked services make proof much harder.
What extra is needed for an ex works sale?
Paragraph 6.6 says the standard of evidence for indirect exports is high and you, the supplier, are liable for the VAT if it falls short. HMRC recommends making export evidence a contractual obligation of the buyer, and taking a deposit equal to the VAT, refundable when proof arrives. The information held should include the customer’s written order, the invoice, delivery address, dates of departure from your premises and from the UK, the collecting haulier’s details, vehicle registration and driver’s signature, the route and port of exit, and the ferry, sailing or flight details. Agree what evidence you will receive before releasing the goods.
What happens if evidence does not arrive in time?
Paragraph 11.2 says you can zero rate the sale in your records when the goods are supplied, but if the goods are not exported or the evidence is not obtained within the limit, you must account for VAT on the amount invoiced or received. At a 20% rate the VAT element is one sixth of the consideration. The VAT goes in box 1 of the return for the period in which the time limit expires. If the evidence later arrives, or the goods are exported later without having been used in the UK, paragraph 11.3 lets you zero rate and adjust in the period the evidence is received.
Illustration only. A GB manufacturer sells goods for £12,000 to a US customer on ex works terms, with the goods collected on 10 March. No proof of export has arrived by 10 June. The supplier treats the £12,000 as VAT inclusive and accounts for £2,000 (one sixth) in box 1 of the return covering 10 June. Proof arrives in August, so the supplier reduces output tax by £2,000 on the return covering August. If the contract had required a £2,400 VAT deposit, the supplier could have kept that until the paperwork arrived.
Are there exports where no VAT is due at all?
Paragraph 2.12 lists exports with no taxable supply: goods you install outside the UK, goods sent temporarily for exhibition or processing, and goods sent on sale or return that remain your property. Paragraph 2.13 covers transfers of your own goods to an overseas branch, which are not supplies and should not be included in box 6. In all these cases you still need valid proof of export. Goods lost, destroyed or stolen in the UK before a direct export carry no VAT if you keep evidence such as a police report or insurance claim, but goods already handed to the overseas customer for an indirect export do (paragraph 2.14).
Geography also catches people out. Under paragraph 2.7 the Isle of Man is treated as part of Great Britain, so sales there are domestic, while the Channel Islands are outside the UK for VAT and sales there are exports.
How long must records be kept and what goes wrong?
Paragraph 6.7 requires proof of export to be kept for 6 years and made readily available to a visiting VAT officer. Lost originals can be replaced with duplicates marked “Duplicate evidence of export” and authenticated and dated by the issuing company (paragraph 6.10). Exports go in box 6 of the return (Notice 700/12, paragraph 3.7).
- Zero rating goods delivered to a UK address because the customer is foreign.
- Relying on a customer’s promise to send proof on an ex works sale, with no deposit.
- Descriptions or values on the invoice that do not match the export declaration.
- Forgetting that a full prepayment starts the 3 month clock.
- Applying export rules to Northern Ireland sales to EU businesses, which follow separate dispatch rules, see selling goods to EU customers.
Export evidence is a routine area for HMRC in a VAT compliance check, and missing evidence usually means a VAT assessment on the full value.
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Sources
- GOV.UK: Vat on goods exported from the uk notice 703
- GOV.UK: How to fill in and submit your vat return vat notice 70012
- GOV.UK: Vat exports dispatches and supplying goods abroad
- GOV.UK: Vat rates
Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.