The Brexit transition period is over, and the rules for moving goods between the UK and the EU are now different.

Some of these changes affect the VAT on goods which export from the UK to the EU. This guide explains what you need to know if your business exports from the UK to the EU.

 
You can also read our straightforward summary of all the recent VAT changes.

What do I need to export to the EU?

Now that the UK is not under the umbrella of EU rules, goods moving across the UK border are imports or exports.

This changes some of the processes for businesses which send goods from the UK to the EU. There are different rules in place for businesses providing services or digital sales.

EORI number

Businesses will need a UK EORI number to export goods from the UK. Your EORI (Economic Operator’s Registration and Identification) number identifies the business as having permission to move goods out of the UK.

The export documents must show two EORI numbers:

• One for the exporter – which will be your UK EORI number.
• One for the recipient if they’re a business.

This means you’ll need the EU EORI numbers of European businesses that you export to. If you’re exporting goods to your branch or warehouse in the EU, you’ll need your own EU EORI number as well as a UK one.

Classify goods with commodity codes

Your buyer must pay customs duties and tax on the goods that you export to them. So that they pay the right amount, the export documents must include commodity codes.

These codes describe what goods you are exporting. You can check which commodity codes to use for classifying goods with the government’s trade tariff checker.
 

Customs declarations

Businesses exporting to the EU must also make customs declarations for the goods they export. There are different options for handling this process, and you can either do it yourself or through an agent.

Check the guidance for making customs declarations.

Export licences

You might need export licences depending on the goods that you export. There are also rules for how some types of goods are transported.

Check if you need an export licence.

Pricing

The changes mean that your EU customers will now pay duty and tax on the goods that you export to them. There are also implications for VAT, which we explain in the next section.

These changes affect how much it costs your EU customers to buy from you. You might need to consider what this means for demand, or for your pricing structure.

Do I need to charge VAT on goods I export from the UK to the EU?

UK VAT registered businesses should zero-rate the UK VAT on exports they make from the UK to the EU.

Why is the UK VAT on exports zero-rated?

UK VAT is only charged on products or services which are for use in the UK. If the goods aren’t for use in the UK, then UK VAT doesn’t apply.

The goods are still taxable, but the UK VAT is zero-rated, which means the rate of UK VAT charged is 0%. You’ll still need to account for zero-rated VAT on exports in your VAT return.

 
The key point here is UK VAT. Only the UK VAT is zero-rated on exports. The buyer will still need to pay VAT in the country that the goods are used in.

The process for this depends on whether the buyer is a business or a private consumer.

• Business to business sales (B2B) – where a business sells goods to another business.
• Business to consumer sales (B2C) – where a business sells directly to the customer, for their own private use.

Exporting from the UK to EU businesses

If the buyer is a business, you’ll need to make sure that they are able to act as an importer for the goods. This includes asking for their EU EORI number.

You won’t have to charge them VAT, but the customs invoice must show the value of the goods so they can pay import VAT at their country’s border.

Exporting from the UK to EU consumers

UK businesses can still sell to EU consumers but the process for VAT is now different, depending on whereabouts in the UK your business is based. Although the UK is no longer part of the EU VAT area, there are special arrangements in place for Northern Ireland to use distance selling rules.

What is distance selling?

Distance selling means you are, quite literally, selling at a distance. Rather than selling in-person, such as in a shop, sales could be made online, or through catalogues.

In the EU, there are processes which help distance sellers deal with VAT when they sell directly to consumers in other EU countries. These rules allow them to charge VAT at the other country’s rate, without registering for VAT there.

Instead, the seller reports the VAT when they submit a VAT return in their own country. That is, until they hit the distance selling threshold. When sales reach the distance selling threshold for a particular country, the seller needs to register for VAT in that country.The distance selling thresholds for EU countries will change from 1st July 2021.

How much is the new distance selling threshold?

From the beginning of July there will be just one distance-selling threshold for VAT which will apply to all EU members. Individual member states will no longer each have their own thresholds.

 
The distance selling threshold was previously worked out on a country-by-country basis. From 1st July 2021 the €10,000 threshold will apply to the total amount of cross-border sales that the business makes.

So, a business in Italy could reach the threshold by making €5,000 of sales to France, and €5,000 of sales to Germany.

How do UK businesses handle VAT on sales to EU consumers now?

This depends on whether your business is in Great Britain (England, Scotland, Wales), or in Northern Ireland.

If your business is in Northern Ireland

Northern Ireland has a special arrangement with the EU which enables businesses there to continue selling to EU consumers under distance selling rules. To report the VAT on those sales, businesses in Northern Ireland can either register for VAT in each EU country they sell to, or opt in to the EU’s One Stop Shop (OSS), which launches on 1st July 2021.

You can register for the One Stop Shop (OSS) alongside your normal VAT return. You’ll need to submit an OSS return detailing all your distance sales to EU consumers, as well as sending your regular VAT return. When you pay your VAT bill any taxes owed to other countries will be sent on as appropriate.

You’ll be able to do this until the total amount of distance sales reaches the €10,000 threshold, at which point you’ll need to register for VAT in the country you’re selling to.

If your business is in Great Britain (England, Wales, Scotland)

You can no longer report the VAT on EU distance-sales through your UK VAT return to HMRC, even if your sales are less than the distance selling threshold.

If you’re a GB-based business which sells to EU customers, then you have two choices.

Move some of your stock to somewhere in the EU

You’ll need to register for VAT in the country where you hold the stock. In doing so, you’ll be able to sell to your EU customers under distance-selling rules from there.

Register for VAT in each of the EU countries that you sell to

And yes, we know, ouch.

If you decide to register for VAT in an EU country, be aware that some countries require you to appoint a special VAT representative. This agent or representative will be directly liable for any unpaid VAT, so they usually ask for some sort of bank guarantee in exchange.

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About The Author

Elizabeth Hughes

A content writer specialising in business, finance, software, and beyond. I'm a wordsmith with a penchant for puns and making complex subjects accessible.