The VAT Retail Export Scheme for E-commerce Entrepreneurs

If the VAT Retail Export Scheme doesn’t ring any bells, you may know it under the guise of “tax-free shopping”. The scheme is completely voluntary, so let’s examine what it is and when to use it.

As with most voluntary schemes, some definitive upsides and downsides are specific to your individual business. There is no “one size fits all” answer as many e-commerce entrepreneurs will not be able to use the scheme, while others may choose to set conditions or run with it without restriction. By understanding what the scheme entails, you will be able to decide if the VAT Retail Export Scheme could be beneficial to your e-commerce business or not.

What is the VAT Retail Export Scheme?

The VAT Retail Export Scheme came into play as Regulation 131 of the VAT Regulations 1995. It allows customers who fit a certain criterion to qualify for a VAT refund if they are purchasing goods in the UK and exporting them outside of the EU for personal purposes.

For customers to qualify they must not have a primary residence within the EU and intend to be leaving the EU within 3 months of the purchase date. Paperwork must be produced to verify this at point-of-sale and again upon reaching Customs. A form will be stamped by Customs as the customer is processed and they will then send the completed paperwork back to you for your records.

VAT Retail Export Scheme for e-commerce
Nilantha Ilangamuwa

What is needed for the Scheme to be used?

E-commerce entrepreneurs need to note that sales must be made face-to-face to be eligible. This disqualifies all internet orders, which fall under VAT Notice 703.

The product can’t be bought by a representative, must be for personal use and the goods must leave the EU by 3 months after the sale is concluded. Services are also not included under the scheme. There are also some disallowed items, which can be read on HMRC’s website.

How e-commerce entrepreneurs can use the Scheme

If you are primarily an e-commerce entrepreneur, you can still make use of the VAT Retail Export Scheme if you have a retail outlet. While the sale cannot take place over the internet, inviting the customer to your fixed business address will allow you to offer the scheme on that transaction.

You can opt-in for purchases on all goods, some goods or even set a minimum spend before you will honour it. You are also under no obligation to sign up for the scheme, even if requested by the customer.

Next steps

The VAT Retail Export Scheme is just one of many pieces of VAT regulation that can be tricky to manage for an e-commerce business entrepreneur. If you are struggling with the complexities of VAT for your business, get in touch today. Our team of e-commerce specialist accountants will ensure any grey areas become crystal-clear.

The best time to act is now.

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