I have a new customer in Ukraine. Having quoted a price exclusive of VAT he has asked for the consignment to be delivered to a UK-based forwarding company. My understanding is that I have to charge VAT – is this correct?
Value Added Tax (VAT) is a UK and more widely an EU-applied tax, and just how it can and is applied can be confusing.
There is a very helpful section on the HMRC website about VAT – what it means, who it applies to and a glossary of terms for those who find themselves having to deal with VAT issues regularly. It looks at items to which VAT is applied and which items attract no VAT or are zero rated, such as food, but not meals in restaurants or hot takeaways, books and newspapers, children's clothes and shoes, and public transport.
However, it is clear that the burden of proof when zero rating (not applying VAT) is higher for intra-EU transactions.
In your case, if you were exporting outside the EU, that is the goods were being sent directly to your customer in the Ukraine, then it would have been appropriate for you to zero rate. You would have had to keep the appropriate level of proof that the goods were in fact leaving the EU. However, as you are now transferring the goods to an UK address you must NOT zero rate them. The full rate of VAT will be chargeable.
HMRC also has a VAT helpline. But before you call, have all the information necessary – your VAT Registration Number and postcode to hand. But always start off with the HMRC website.
See also: Catering and VAT