We have been advised of a HM Revenue & Customs (HMRC) audit in the UK, and have been told that we need to ensure that we have full documentary evidence of exports made outside of the EU. I believe this is related to the zero-rating of VAT. We have checked Notice 703, and believe that we can comply with the evidence requirements for both direct and indirect shipments — commercial transport invoices and appropriate supplementary evidence. However we have been advised (from the compliance section of our company based in Germany) that we need to show evidence that goods have been delivered to customer, not merely shipped. Can you possibly shed some light on this?
We have checked with our VAT specialist, HMRC helpline and discussed with colleagues and customers who have had recent audits and we all agree that “the basket of evidence” you provide during the audit needs to convince HMRC VAT inspector that goods really did leave the EU and go to customer in another country (outside the EU).
HMRC normally ask for all paperwork to support this and the list includes:
- Customer’s purchase order
- Your sales order confirmation
- Your invoice, packing list, certificate of origin, export licence etc.
- Freight document (air waybill, bill of lading, courier waybill etc.)
- NES (the UK electronic export declaration)
- Freight agent bill for services
- Proof of Delivery (POD)
- Proof of payment from customer
It would be very unusual for a company to hold every single piece of paper covering all the above. We have known HMRC to accept just item 2 and 4, or 2 and 5. If you hold most of the above you should be OK, if you hold all other than item 7 then it would is unusual for HMRC to issue VAT demand but we suggest you ask freight agents (or go onto their tracking system) or customers to send you a POD or confirm receipt by email to add to the pot. Proof of Delivery is becoming more important for shipments within the EU to evidence that the delivery can be VAT-zero rated and both Germany and Hungary have introduced mandatory POD systems for internal EU shipments.
Source – Croners Wolters Kluwer Business