VQOTW: Direct and Indirect Exports

My client has been asked to supply footballs for use by a youth team in Kenya. They will deliver direct to the shipper, but will invoice a UK charity. Please could you confirm whether they can zero-rate the sale under the export rules?

When considering this type of question it is important to establish whether the export is direct or indirect as per the definitions below:

Direct exports: are where the transaction is under the control of the supplier. The goods are exported by the supplier himself, or by another person acting on his behalf such as his agent. Section 30(6) VAT Act 1994.

Indirect exports: are where the shipment of the goods is controlled by someone other than the supplier, such as an overseas customer or their agent, who arranges for the goods to be collected from the supplier’s premises. Section 30(8) VAT Act 1994 and Regulation 129 (1) SI 1995/2518.

As such, if the shipper is engaged by your client, then they are in control of a direct export; whereas if the shipper is engaged by the charity we have an indirect export.

The reason for making this distinction lies in the different treatment of direct and indirect exports:-

  • A direct export (where the seller is in control of the shipment) can be zero-rated if the goods are physically exported to the customer within the specified time limit (generally 3 months with some exceptions) and official or commercial evidence of export is obtained. So if the charity will itself receive the goods in Kenya, a direct export to them could be zero-rated. It does not matter whether the customer is established in the UK.
  • An indirect export (where the customer is in control of the shipment) on the other hand,  cannot be zero-rated if the customer has a UK establishment.

The differing conditions are outlined in paragraphs 3.3 and 3.4 of Notice 703 https://www.gov.uk/guidance/vat-on-goods-exported-from-the-uk-notice-703.  In your client’s case if the charity has engaged the shipper UK VAT should be charged as the supply is an indirect export to a UK established customer.

A variation of this scenario is dealt with in section 4 of Notice 703. This makes the point that in a chain of transactions leading to an export, it is only the final supply which can be zero-rated. So for example if UK Co A is supplying goods contractually to UK Co B, but is delivering those goods direct to Co B’s overseas customer, the supply from Co A to Co B must be standard-rated, as Co B is not an overseas person.

As a final point if the client were to donate rather than sell the goods to the charity for export, the donation could be zero-rated under Item 2 Group 15 Schedule 8 VAT Act 1994.


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Sally is the Team Leader of the VAT Advice and Consultancy team at Croner Taxwise. She has worked in VAT since 1990, including eight years spent with HMRC, both as an Assurance and Enquiries Officer involved in presenting seminars and business education. Since joining private practice in 1999, Sally has specialised in providing VAT technical advice to a variety of clients, ranging from small one-man bands to large multi-national corporations, on the full range of VAT technical matters.

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