If your UK business buys from or sells to other countries, understanding how VAT (Value Added Tax) applies is essential.
Since Brexit, the rules for international trade have changed, and many business owners are still catching up.
Below, we’ve summarised how VAT works when you import or export goods and services - and how to stay compliant while protecting your cash flow.
VAT on Goods You Import into the UK
When you buy goods from outside the UK (including from the EU) and bring them into the country, you must pay Import VAT.
- Import VAT is charged when the goods arrive at the UK border.
- The VAT rate is usually the same as the UK rate that would apply if you bought the goods domestically, from a UK supplier.
If your business is VAT-registered, you can reclaim the Import VAT on your VAT return - so it isn’t an extra cost.
Tip:
To improve cash flow, use the Postponed VAT Accounting (PVA) scheme.
This allows you to declare and recover Import VAT on the same VAT return, instead of paying it upfront at the border.
VAT on Goods You Sell Outside the UK
When you sell goods to customers outside the UK, these sales are usually zero-rated for VAT (0% rate). This applies whether your customer is a business or an individual overseas.
However, you must be able to prove that the goods have physically left the UK. HMRC may request this evidence, so it’s important to keep:
- Shipping or courier documents
- Tracking information
- Customs paperwork
- Invoices showing delivery addresses
Without sufficient proof, HMRC can require you to charge VAT on the sale - so keeping clear export records is vital.
VAT on Services Purchased from Outside the UK
If your business buys services from suppliers outside the UK, the reverse charge rule often applies.
That means your business accounts for both the output VAT (as if you sold the service) and the input VAT (as if you bought it).
For business-use services, this normally balances out on the same VAT return - so there’s no extra cost overall.
The reverse charge simply ensures VAT is reported correctly on inbound cross-border services.
VAT on Services You Sell to Customers Outside the UK
When selling services to customers outside the UK, VAT treatment depends on where your customer is located and whether they are a business or consumer.
- Selling to a business (B2B):
Usually outside the scope of UK VAT, so you don’t charge VAT on the invoice.
- Selling to a consumer (B2C):
You may need to charge UK VAT, depending on the type of service provided.
It’s important to check the VAT rules for your specific service type - professional advice ensures you charge correctly and stay compliant.
How We Can Help
International VAT can be complex - and the post-Brexit rules often trip up even experienced businesses. If your company trades with overseas customers or suppliers, we can help you manage VAT registration, import/export procedures, and compliance efficiently.
Arnold Hill & Co LLP - accountants helping UK businesses trade confidently across borders. Contact us today!
Author, Sandhya Gollapudy - Outsourced Finance Senior
Sandhya.Gollapudy@ArnoldHill.co.uk
