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What is the VAT Retail Export Scheme and can you use it?

VAT Retail Export Scheme

The VAT Retail Export Scheme is often advertised by retailers as ‘Tax Free Shopping’.  It allows customers from outside the EC to claim a refund on VAT they have been charged when they buy goods in the UK.

The scheme is completely voluntary for a retailer.  They can choose whether or not to take part, and they can choose when to offer it.  For example, there could be a minimum sale value or it could be on certain goods only.

There are several things that need to be in place for the VAT Retail Export Scheme to be used.

  • It must be a sale of goods – services are not included
  • Is must be a face to face sale – so mail order and Internet orders are not eligible
  • The purchase must be made by the person themselves – they can’t send a representative (although a third party can make payment)
  • The customer must take the goods out of the EC by the end of the third month after the sale is made (so a sale on 1st June must have left the EC by 30th September)
  • The customer must be buying the goods for personal use, and the goods must go with the customer as they leave the EC
  • Certain goods are excluded

When a sale is made, VAT is charged at the normal rate.  The customer and retailer must fill in a VAT 407 form and the retailer needs to check that the customer is eligible – normally by checking a passport or driving licence to confirm the customer’s normal country of residence – and the retailer should also check that the customer is leaving the EC within the required time limit.

The customer must then get the form stamped by Customs as they depart the EC and then return it to the retailer – normally by post.

Once the retailer has received a stamped form, they must refund the customer for the VAT that was paid.  They are allowed to make an administration charge if they choose (which should have been communicated to the customer at the time of the sale).  Once the refund has been made, then the retailer can record the sale as zero-rated and can adjust their VAT records accordingly.

Need to more know?  Just contact us – we’d love to help!


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