VAT Retail Exports

Foreword

This notice cancels and replaces Notice 704 (July 2003). Details of any changes to the previous version can be found in paragraph 1.2 of this notice.

Regulation 131 of the VAT Regulations 1995 sets out conditions for using the Retail Export Scheme. This regulation also gives the Commissioners power to impose further conditions which must be met to allow a supply to be zero-rated. Parts of this notice have the force of law under that regulation. These parts are indicated by being placed in a box as in the example shown below.

EXAMPLE:

Further help and advice

If you need general advice or more copies of Customs and Excise notices, please ring the National Advice Service on 0845 010 9000. You can call between 8.00 am and 8.00 pm, Monday to Friday.

If you have hearing difficulties, please ring the Textphone service on 0845 000 0200.

If you would like to speak to someone in Welsh, please ring 0845 010 0300, between 8.00 am and 6.00 pm, Monday to Friday.

All calls are charged at the local rate within the UK. Charges may differ for mobile phones.

Other notices on this or related subjects

703 Export of goods from the United Kingdom

703/2 Sailaway boats supplied for export outside the EC

704/1 VAT refunds for travellers departing from the European Community

705 Buyer’s guide to personal exports of motor vehicles to destinations outside the EC

1. Introduction

1.1 What is this notice about?

This notice explains when supplies of goods sold by VAT registered retailers to entitled persons for personal use and exported as accompanied baggage can be zero-rated. In particular, it sets out the conditions that must be complied with by retailers and entitled customers using the VAT Retail Export Scheme.

1.2 What’s changed?

The notice has been rewritten to improve readability. In addition, the scheme and conditions have been reviewed and changed and you are strongly recommended to read through this notice to understand where changes have been made. The main changes have been introduced to:

• take account of European Community (EC) enlargement from 1 May 2004 (covered in update 1, issued February 2004);
• limit purchases under the scheme by overseas students and migrant workers to the end of their stay in the EC;
• include the new invoicing requirements arising from implementation of the EC VAT Invoicing Directive; and
• set out conditions for retailers who complete refund forms after the date of sale.

You can access details of any changes to this notice since November 2004 either on our Internet website at www.hmce.gov.uk or by telephoning the National Advice Service on 0845 010 9000.

This notice and others mentioned are available both on paper and on our website.

1.3 Who should read this notice?

This notice is intended for retailers and entitled customers.

1.4 What is the legal status of this notice?

Article 15 of the EC Sixth VAT Directive states that Member States shall lay down conditions “for the purpose of ensuring the correct and straightforward application of such exemptions (zero-rating) and preventing any evasion, avoidance or abuse”. Under United Kingdom VAT law, the Commissioners of Customs and Excise may specify conditions in regulations or otherwise impose conditions to meet this requirement.

The VAT Regulations 1995 and this notice lay down the conditions for the VAT Retail Export Scheme which must be met in full for a supply of goods for export outside the EC to be zero-rated. As these conditions have legal status, some legal wording has been necessary but plain English has been used wherever possible.

1.5 Where can travellers obtain further information?

Retailers and travellers may obtain further information and advice from the National Advice Service on:

• 0845 010 9000; or
• +44 20 8929 0152 for international callers.

See “Further help and advice” on the inside front cover for full details. This notice and others mentioned are available in hard copy from the National Advice Service and on our website.

A simplified notice aimed specifically at travellers, Notice 704/1 Tax Free Shopping: VAT Refunds for travellers departing from the European Community (EC) highlights the main aspects of the scheme. Notice 704/1 is available in various languages.

Tourist and travel organisations as well as the VAT refund companies distribute information about the VAT Retail Export Scheme.

(Please note that whilst retail export schemes operate throughout the EC they are regulated by the laws of the individual Member States and may differ in significant details from the scheme in the UK. Travellers wishing to purchase goods in another EC Member State should contact the Customs or tax authorities of the Member State for detailed information and advice.)

2. General Principles

2.1 What is the VAT Retail Export Scheme?

The VAT Retail Export Scheme allows:

• certain customers (see paragraph 2.4) to receive a refund of VAT paid on goods exported to destinations outside the European Community (EC) subject to conditions detailed at paragraph 2.3; and
• retailers to zero-rate goods sold to entitled customers when they have the necessary evidence of export and have refunded the VAT to the customer.

This is a voluntary scheme and retailers do not have to operate it. Those who do must ensure that all the conditions set out in this notice are met.

2.2 Is there a minimum sales value?

No. Although retailers may set a minimum sales value below which they will not operate the scheme.

2.3 What conditions apply to the scheme?

2.3.1 Can the time limit for export be extended?

No. The goods must be exported from the EC by the last day of the third month following that in which the goods were purchased.

2.4 Who can buy goods under the scheme?

2.4.1 Overseas visitors

An overseas visitor is a traveller (including a member of the crew of a ship or aircraft) who is not established in the EC. This means a person:

• whose domicile or habitual place of residence is not situated within the EC. A person’s “domicile or habitual residence” is the place entered as such on their valid passport, identity card or other acceptable document, such as a driving licence. The customer must prove their eligibility to use the scheme by providing one or more of these documents; and
• who intends to leave the UK for a final destination outside the EC, with the goods, by the last day of the third month following that in which the goods were purchased (for example, goods purchased on 1 June must be exported by 30 September); and
• who exports the goods having produced them, their receipts, and the VAT refund document to a Customs officer at the point of departure from the EC.

2.4.2 Overseas visitors studying or working in the UK

Overseas visitors (see paragraph 2.4.1) entering the UK as students or migrant workers are only entitled to purchase goods under the scheme during the last 4 months of their stay in the UK. Such visitors will have been issued with a pre-entry visa from the UK and in the case of work periods of 6 months or more a separate work permit document is issued in the UK. The visa is contained in the overseas person’s passport and shows the start and end date for the study or work period authorised. Retailers should ask to see the visa or work permit before selling goods under the scheme.

The customer most prove their eligibility to use the scheme by providing evidence that the period of their visit is ending and must:

• intend to leave the EC with the goods by the last day of the third month following that in which the goods were purchased; and
• having left the EC remain outside the EC for a minimum period of 12 months; and
• export the goods having produced them, their receipts, and the VAT refund document to a Customs officer at the point of departure from the EC.

2.4.3 Entitled EC residents

For the purposes of this scheme only, a customer who is established in the EC but intends to permanently leave the EC for a minimum period of 12 months may also be treated as an overseas visitor. To qualify under this provision, the customer must:

• intend to leave the UK with the goods by the last day of the third month following that in which the goods were purchased for an immediate destination outside the EC; and
• remain outside the EC for a period of at least 12 months. The customer must prove their eligibility to use the scheme by providing evidence of their intention to remain outside the EC for at least 12 months. Typically this evidence would be one of the following: overseas work permit, approved visa application, residency permit; and
• export the goods having produced them, their receipts, and the VAT refund document to a Customs officer at the point of departure from the EC.

2.5 Which countries are in the EC?

The VAT territory of the EC is made up of 25 Member States, including some territories with which certain countries have links. Goods cannot be purchased under this scheme for removal to another Member State. Details of the fiscal (VAT) territory of the EC and of the special territories that are outside the EC for VAT purposes are in Section 9 of this notice.

2.6 What goods can be sold under the scheme?

2.7 Can retailers exclude certain goods from the scheme?

Yes, they can if they wish. They do not have to operate the scheme for all lines of goods that they sell.

2.8 Can the scheme be used for sales by mail order or goods sold over the Internet?

No. Goods sold to entitled persons by mail order or over the Internet will fall within the export rules set out in Notice 703 Export of goods from the United Kingdom. However, a mail order company or an Internet retailer with a retail outlet can use the scheme for goods sold from that outlet provided they comply with all the conditions set out in this notice.

2.9 Can the scheme be used for services?

No. The scheme is for the sale of goods only. The scheme cannot be used for services supplied to customers such as hotel accommodation, meals and car hire. This applies even where services are sold with the goods, for example labour costs for fitting spare parts to a motor vehicle. Where a vehicle brought into the UK for the use of the overseas visitor requires repairs, the sale of the spare parts only and not the cost of fitting can be included in the scheme.

But see Notice 703 Export of goods from the United Kingdom for guidance on what to do in the case of a vehicle owned by an overseas person and temporarily imported for work. Extended warranty work may not be zero-rated under the VAT Retail Export Scheme.

3. Making a sale under the VAT Retail Export Scheme

As a retailer, you are strongly advised to keep a stock of VAT Notices 704 and 704/1 to help you explain the scheme to customers who may not have obtained a notice for themselves.

3.1 What to do at the time of sale

Please note that for you to comply with the conditions of the scheme your customer must attend in person at the time of the sale although a third party may pay for the goods. There is no facility under this scheme for a representative to attend in place of the entitled person at the time of the sale.

When customers ask to use the scheme you must:

In addition give your customer a copy of Notice 704/1 and:

• agree with your customer how the refund will be made. (It would be useful to provide your customer with a reply paid envelope for the refund document to be returned after stamping by Customs);
• explain about any administrative fees;
• mark your customer’s sales receipt to indicate that the goods have been included on a VAT refund document. For example: “VAT Export”;
• explain that no refunds will be made on items (such as perfume) wholly or partly consumed in the EC;
• advise them to produce their refund document to the Customs officer for stamping at the point of departure from the EC. Explain that failure to do so will mean that a refund will not be paid. The goods and receipts must also be available for inspection if required. (See paragraph 3.4 if the customer is departing the EC on a through (transit) flight);
• advise them to allow plenty of time in which to produce their goods and refund form prior to departure. This is particularly important if they are exporting goods in hold baggage as they may need to allow up to two hours in addition to their advised check in time in case of queues;
• advise them to carry items of high value, for example, jewellery, furs, cameras, watches, silverware, laptop computers and small antiques in their hand baggage; and
• you may also wish to advise your customer to take a photocopy of the VAT refund document once it has been stamped by Customs.

3.2 Refund documents

When you make a sale under the scheme to an entitled person going to a final destination outside the EC you must complete a VAT refund document. The document can be a Form VAT 407 or an officially approved invoice that both you and your customer must sign at the time of the sale.

The document must be the original signed by you or your representative and by your customer - photocopies will not be accepted by Customs at export.

3.3 Issuing VAT 407 Forms

Blank VAT 407 forms must not be issued to members of the public. They must only be issued to VAT registered retailers who operate the VAT Retail Export Scheme.

3.4 Producing goods and refund documents to Customs

You should give customers a copy of Notice 704/1 and advise them that:

• they must produce the VAT refund document to the Customs officer at the point of departure from the EC. The goods and receipts must also be available for inspection if required. The Customs officer will stamp the refund document to show that the goods have been exported and return it to the customer; and
• they should send back to you or to the refund company the refund documents stamped by the UK or EC Customs officer. They should use the reply paid envelope you provide, or hand the documents to the cash refund booth, if appropriate (see paragraph 6.4).

Remember, whilst a single refund document is acceptable, it is recommended that you issue separate VAT refund documents (but make only one administrative charge) if the customer intends to carry some goods in hand baggage and other goods in hold baggage. This is particularly important if the customer is leaving on a through (transit) flight via another EC airport because the goods in hold baggage must be declared before check in, whilst the goods in hand baggage must be declared at the final point of departure from the EC.

3.5 Goods not exported

When customers present the VAT refund documents to the UK or other EC Customs officer, they are making a declaration that all the goods shown on the document are being exported from the EC. Customers sometimes decide not to export goods purchased under the scheme.

You should inform your customer that any goods listed on the VAT refund document not exported from the EC must be clearly deleted from the document before it is presented to a UK or EC Customs officer for stamping. It is a Customs offence to make a false declaration.

3.6 Charging for administrative or handling expenses

If you intend to deduct an amount from the refund due, to cover administrative or handling expenses, the amount of the administration fee and net refund due must be shown clearly on the VAT refund document. You are strongly advised to explain this charge clearly to your customers when they buy the goods to avoid subsequent confusion or misunderstanding.

3.7 Refunds to customers

When you receive a VAT refund document stamped by UK or other EC Customs, check that all goods have been exported from the EC by the last day of the third month following that in which the goods were purchased.

Where they have, you should make any refund due to your customer by the method agreed at the time of sale.

You cannot zero-rate the sale unless you have a stamped VAT refund document showing that the goods have been exported within the time limit and can show that the refund has been made to your customer.

Refund forms stamped outside the EC are not to be accepted as evidence of export under any circumstances.

4. Completion and control of refund forms

You may use a Form VAT 407 or adapted invoice for the scheme.

4.1 Form VAT 407

If you use the Form VAT 407 the following versions can be used:

• Form VAT 407 issued by Customs, available free of charge from the National Advice Service;
• your own version of the Form VAT 407, containing the same information as the Customs’ version and approved beforehand by Customs; or
• a refund company’s version of the Form VAT 407, containing the same information as the Customs’ version and approved beforehand by Customs.

4.2 How to complete Form VAT 407

When completing a Form VAT 407 the following instructions must be followed.

Customs officers may refuse to stamp refund forms completed incorrectly or not completed in full. For example, forms showing inadequate descriptions of goods may be rejected.

4.3 Officially approved invoice

If you do not use one of the versions of Form VAT 407 described at paragraph 4.1 you may use an officially approved invoice. You should be aware that if you do use an officially approved invoice you must meet the requirements of invoicing legislation. The invoice must include the details set out at paragraph 4.3.1.

4.3.1 What general information is required on an invoice?

Where the total consideration for a supply (including VAT) is less than £250 a simplified invoice may be issued. Simplified invoices must show:

• your name, address and VAT registration number;
• the time of supply;
• a description sufficient to identify the goods supplied;
• the total amount payable including VAT; and
• for each rate of VAT chargeable, the gross amount payable including VAT and the VAT rate applicable.

Where the total consideration for a supply (including VAT) is £250 or more, the invoice must show:

• an identifying number;
• your name, address and VAT registration number;
• date of issue;
• time of supply (tax point - only needs to be shown if different from the date of issue);
• your customer’s name (or trading name) and address*;
• a description identifying the goods (or services) you are supplying;
• the gross total amount payable excluding VAT;
• the rate of any cash discount offered;
• the unit price (see Notice 700 The VAT guide); and
• the total amount of VAT charged, shown in sterling.

For each description, of goods (and services) you must show the:

• quantity of goods (or extent of the services);
• rate of VAT; and
• amount payable excluding VAT.

*Where an approved invoice is used for the scheme the usual address will be your customer’s place of residence outside the EC.

Provided your customer agrees, a retailer may issue a modified VAT invoice showing the VAT inclusive amounts of each supply instead of the VAT exclusive values. However, in all other respects the modified invoice should show the details required for a full VAT invoice (see Notice 700 The VAT guide as amended by Update 2 issued February 2004

Remember, you cannot use the VAT Retail Export Scheme for services.

4.4 Design and size of own versions of VAT 407s or invoices

4.5 Prior approval of own versions of VAT 407s or invoices

You must seek approval beforehand from Customs and Excise if you wish to use your own adapted VAT 407 or invoice for sales made under the scheme.

Remember, if you use an officially approved VAT 407 or invoice you must still make sure that your customer is entitled to use the scheme and that the declarations are completed in full and signed by you (or another responsible person in your business) and your customer at the time of the sale.

4.6 How can I obtain approval from Customs and Excise?

If you do not intend to use the VAT 407 Form issued by Customs and Excise you must send a sample of your own invoice or version of the VAT 407 refund document for approval to Customs & Excise. Addresses can be obtained from the National Advice Service on 0845 010 9000 (see the “Further help and advice” section at the front of this notice for details), or via our Customs and Excise Internet home page by following the links from ‘contact us’ through to Written Enquiries Teams.

4.7 Reply paid envelope

Each year several hundred VAT refund documents are returned to Customs at Heathrow airport for a variety of reasons. This is usually because the postage has not been paid and because the document contains a customs’ stamp. Whether using a Form VAT 407, your own or a refund company’s version, or an adapted invoice, give your customer the fully completed VAT refund document and a reply paid envelope addressed to either you or the refund company administering the refund. If you do not provide a reply paid envelope, you should make it clear that your customer is responsible for providing the envelope and paying the correct postage.

4.8 Can I complete the VAT refund form before export of the goods for past purchases?

Paragraph 3.2 states that refund forms must be completed at the time of sale. Customers may ask you to complete a refund form to cover past purchases. You may only agree to such requests provided you have adequate security procedures in place to prevent abuse of the scheme. This includes:

• stamping till receipts to show that the goods have been purchased under the Retail Export Scheme, for example “VAT Export”.
• your till system allowing you to check that the receipts produced are genuine and can only appear once on a VAT 407 refund document;
• your system allowing you to check whether:
  - a refund for returned goods has already been made for a receipt now produced or
  - a VAT 407 refund document has been issued for goods where a refund for returned goods is now sought.

4.8.1 Completion of refund documents on production of receipts for past purchases

Where you do have adequate safeguards in place to prevent abuse of the scheme and a customer asks for a refund document to cover a series of purchases over a period of time, you must include only those goods that will be exported by the last day of the third month following that in which the goods were purchased. The purchase date entered on the refund document must be the date of the earliest purchase.

4.9 Control of blank or partly completed VAT refund documents

Whether you use:

• Form VAT 407 issued by Customs;
• a refund company’s version of the form; or
• your own officially approved invoice,

you must:

• keep stocks of the blank documents secure;
• not issue blank or partly completed forms to any person outside your business.

4.10 Uncertified export documents

There are no exceptions to this rule.

4.11 Lost refund documents

4.11.1 Document lost before certification

If your customer has lost the VAT refund document before leaving the EC and asks for another, you can prepare a “DUPLICATE” clearly marked as such. The duplicate form and the goods must be produced to the Customs officer at the point of departure from the EC. You should take steps to ensure that should the original document appear it is not processed through your records.

When issuing a duplicate document, you must:

• make sure the original document has not been received and processed by you already;
• be satisfied that a sale took place by the production of till receipts or other information; and
• advise the traveller if they find the original refund document later, it is to be cancelled.

If you later receive the original document ensure it is cancelled.

4.11.2 Document lost after certification

If your customer has lost the VAT refund document after stamping by UK or other EC Customs, you may issue a duplicate only where a photocopy of the stamped original is produced. Duplicates of forms lost after Customs stamping must not be issued in any other circumstances.

The duplicate and the photocopy of the original document stamped by Customs must be sent to the Customs officer who stamped the original document. If satisfied, the Customs officer will stamp the duplicate and return it to you so that a refund may be made.

5. Accounting for VAT

5.1 Must I charge VAT at the point of sale?

You must treat any sale of standard-rated and lower-rated goods you make under the scheme as liable to VAT until you have received the VAT refund document appropriately stamped by a UK or other EC Customs officer. It is in your interest to charge VAT at the point of sale, and refund it to your customer only when you get valid evidence of export. Until you receive the necessary evidence of export and make the refund to your customer you will have to account for the VAT due.

5.2 What must I do before zero-rating the sale?

If the certified VAT refund document arrives after you have accounted for VAT, you can refund the VAT and zero-rate the sale by reducing your output tax by the relevant amount in box 1 of your VAT return - see Notice 700 The VAT Guide.

5.3 Retailers using a retail scheme

The individual retail schemes notices (in the 727 series) will explain how you should deal with sales and refunds under the VAT Retail Export Scheme in your retail scheme calculations.

5.4 Retailers not using a retail scheme

You must keep a record of all sales including VAT made under the VAT Retail Export Scheme. When you receive a VAT refund document stamped by a UK or other EC Customs officer and you have refunded the VAT, you can zero-rate the sale in your records.

5.5 Refund companies

You may contract with a refund company to administer the refund on your behalf. Refund companies usually provide an officially approved VAT refund document of their own design for use by retailers. If you use one of these companies, you still have to account for the VAT, as explained in paragraphs 5.1 and 5.2. You must retain the certified VAT refund documents and evidence that the VAT has been refunded in your records to support any zero-rating claimed.

5.6 Concession shops

Many larger stores operate concessions for other retailers within their own stores, where one counter or area sells goods from another retailer’s range. Where the sale is rung through the main store tills it is acceptable for the VAT refund document to be issued by the host store (typically at the main customer service desk). In these circumstances the host store is responsible for complying with the conditions of the scheme as set out in this notice and for accounting for the VAT.

However, where the concession operates its own tills and issues receipts in its own right showing its own name and VAT number, any VAT refund documents relating to these purchases must be issued by the concession and not the host store. In these cases the concession is responsible for complying with the conditions of the scheme as set out in this notice and for accounting for the VAT.

5.7 Direct reclaim system

The direct reclaim system involves two distinct transactions. A retailer sells goods to a refund company who immediately sells them on to an eligible traveller. The accounting procedure is as follows:

• The retailer must invoice the sale to the refund company because this is a business-to-business supply, not a retail sale, and account for VAT on the supply. See paragraph 4.3.1 for the information that must be included on a VAT invoice.
• The refund company may use the invoice from the retailer to reclaim input tax on the purchase from the retailer. Notice 700 The VAT Guide provides information on the rules for invoices and claiming input tax.
• The refund company must also account for VAT on the sale to the traveller. It may subsequently zero-rate the supply but only where and when all the conditions of the VAT Retail Export Scheme set out in this notice are met.
• The retailer may include the sale to the refund company in their daily gross takings for retail scheme purposes if they wish.

5.8 Sales under the Margin Scheme for second-hand goods, works of art, antiques and collectors’ items

If you make sales under the Margin Scheme for second-hand goods, accounting requirements will differ from those that must be fulfilled under the VAT Retail Export Scheme. You can use the two schemes for a single sale if you adapt the VAT refund document as follows:

• head it “Second-hand goods - this document is adapted in accordance with Notice 704, paragraph 5.8”;
• leave the line “Amount of VAT included in the price” blank; and
• complete the refund due box.

See also Notice 718 Margin Schemes for second-hand goods, works of art, antiques and collectors’ items.

5.9 Sales by auctioneers

If an auctioneer sells goods on your behalf to someone who is entitled to use the Retail Export Scheme and a VAT refund document is completed, you can zero-rate the sale when:

• the VAT refund document stamped by a UK or EC Customs officer is returned to you, and
• you have made the refund to your customer.

However, the VAT Retail Export Scheme can no longer be used for goods exported as freight (see paragraph 6.2). Exports of goods by freight should be made in accordance with the procedures described in Notice 703 Export of goods from the United Kingdom.

If auctioneers are registered for VAT and sell goods in their own name to someone who is entitled to use the scheme then, for VAT purposes, they may be treated as both receiving and making a supply of goods in accordance with Notice 700 The VAT Guide. They can zero-rate the sale provided they hold a VAT refund document stamped by a UK or EC Customs officer and have refunded the VAT to their customer.

5.10 VAT treatment of administration or handling fees

If you deduct an amount from the VAT refund due to cover administrative or handling expenses, the amount you deduct is a consideration for the supply of the service to your customers in connection with the export of goods to a destination outside the EC, and is zero-rated.

6. Other information

6.1 Goods exported as hold baggage

Customers leaving by air may not always be able to export large or heavy items as hand baggage and customers buying such items should be advised to inform Customs before checking their baggage in. The airline enquiry desk can tell your customer of the Customs arrangements in force, as these vary from airport to airport.

Advise your customer that during busy periods queues are likely. Therefore they may need to allow up to two hours, prior to check in and the security procedures, to produce the goods and refund document. Long queues at the airport will not be accepted as a reason for failing to obtain a Customs stamp on the refund form.

6.2 Goods exported as freight

The concession allowing the Retail Export Scheme to be used for goods exported by travellers as freight (including unaccompanied baggage, courier and post) was withdrawn on 1 July 2003. The procedures for exporting goods by freight are described in Notice 703 Export of goods from the United Kingdom.

6.3 Supplies to diplomats, members of international organisations and NATO forces in other Member States

The scheme cannot be used for such supplies. There are special arrangements under Article 15(10) of the EC Sixth VAT Directive - see Notice 725 The Single Market.

6.4 Cash refund booths

Some refund companies have arrangements with refund booths at ports, airports and border crossing points from which cash refunds can be made to travellers before they leave the EC. In addition some refund companies will pay cash refunds to travellers in local currency at their destinations. The cash booth may charge your customer an additional administrative fee for these facilities. In all cases the customer will need to have their VAT refund document stamped by Customs at the place of departure from the EC.

6.5 Export licensing

Antiques may be exported only on production of a valid export licence to Customs at the point of departure from the UK. Further advice can be obtained from:

The Department for Culture, Media and Sport
2-4 Cockspur Street
LONDON
SW1Y 5DH

If you sell goods that fall into this category you should explain this to your customers. They will probably need your assistance to obtain an export licence.

6.6 Information on other types of exports

Notice 703 Export of goods from the United Kingdom contains further guidance on zero-rating goods sent directly from the UK as freight or by courier or post.

7. Information for travellers

7.1 What is the VAT Retail Export Scheme?

While you are in the United Kingdom (UK) you will pay Value Added Tax (VAT) on most goods that you buy. The VAT Retail Export Scheme allows you to claim a VAT refund on some of those goods by following the conditions summarised at paragraph 2.3 of this notice. Many shops in the UK will advertise the scheme as “Tax Free Shopping”.

7.2 Do I qualify to use the scheme?

Paragraph 2.4 explains who is entitled to use the scheme.

7.3 Can I use the scheme for everything that I buy?

No. Not all shops operate the scheme; check before you buy. You cannot use the scheme to get a refund of VAT on meals and services such as hotel accommodation, car hire, taxi fares, etc, even though you may have been charged VAT on them.

The scheme may be used for any standard rated and lower-rated goods except those listed in paragraph 2.6 of this notice. There are different rules for these goods. You can get details and copies of the relevant notices from the National Advice Service. See the “Further help and advice” section at the front of this notice for details.

Under certain circumstances business travellers may obtain refunds of VAT paid on services provided and goods consumed in the EC. Notice 723 Refunds of VAT in the European Community for EC and non-EC businesses explains the conditions and how to make a claim. Customs officers at the place the traveller departs the UK are not involved in the refund of VAT on business expenses.

7.4 Making a purchase using the VAT Retail Export Scheme

7.4.1 What must I do before buying the goods?

Check that the retailer operates the scheme. Retailers do not have to operate the scheme, but those who do usually advertise the scheme as “Tax Free Shopping”.

7.4.2 How do I buy tax-free goods?

Purchases must always be made by you personally although they may be paid for by a third party. There is no facility under this scheme for a representative to attend in your place at the time of sale.

7.4.3 When you buy the goods:

• tell the retailer that you want to use the scheme;
• ask the retailer to explain how the scheme works. You should make sure you understand what you have to do;
• tell the retailer your country of final destination. The retailer will ask you to provide proof that you are eligible to use the scheme (see paragraph 2.4);
• the retailer will ask you to complete and sign a VAT refund document at the time of sale in his presence. Make sure that you complete part A in full. Incomplete forms will not be stamped by Customs;
• make sure the retailer fully completes part B including an accurate description of the goods and signs the retailer’s declaration in part C; and
• discuss with the retailer how the refund will be made, for example, cheque or credit card, how long it will take to receive the refund and any administration charges they will make.

The retailer will then give the completed VAT refund document to you. You may also be given a reply paid envelope. If the retailer does not give you one, you must provide an envelope and pay the postage for the return of the refund form after it has been stamped by Customs.

Remember, you must not allow anyone to sign the refund document on your behalf. If you do so, you will not be entitled to a VAT refund.

7.4.4 What VAT refund document will the retailer give me?

The retailer will give you one of the following documents:

• an official Customs Form VAT 407;
• a shop or refund company’s own version of the VAT 407 form; or
• a sales invoice that is headed ‘Retail Export Scheme’ and contains all the details that are shown on a Form VAT 407.

7.4.5 What happens if I return the goods to the shop for a refund or exchange?

If you wish to return goods that have been sold to you under the scheme, either for a full refund or for exchange you must also take your receipt and the VAT refund document back to the retailer. The retailer will delete the entry for the returned goods or cancel the VAT refund document and issue a new one as appropriate.

7.4.6 Can I use the scheme without an approved VAT refund document?

No. You cannot use the scheme without one of the refund documents described in Section 4. These forms are only available from VAT registered retailers who operate the scheme. They are not available to travellers at airports, ports or from Customs and Excise. Till receipts alone are not acceptable for the scheme as operated in the UK.

7.5 Exporting the goods

7.5.1 When must I export the goods?

You must export the goods from the EC by the last day of the third month following that in which the goods were purchased. For example, goods purchased on 3 February have to be exported by 31 May.

7.5.2 What must I do when I leave the EC?

(a) Leaving for an immediate destination outside the EC:

• If you are not travelling to any other country within the EC, you must present your refund document to Customs at your port or airport of departure when you leave the UK. The goods and receipts must also be available for inspection if required.
• If you are leaving by air and have goods that are too large or heavy to carry on board the aircraft you may pack them in your hold baggage. If you do this, you should contact the Customs officer before you check in and produce the goods for examination and the refund document for certification. However, you should always carry high value items in your hand baggage, this includes jewellery, furs, cameras, expensive watches, silverware, laptop computers and small antiques. Contact the airline or airport enquiry desk to check the arrangements in force as these vary from airport to airport.
• During busy periods, queues are likely and you should allow yourself plenty of time in which to produce the goods and refund document before departure. This is particularly important if you are exporting goods in your hold baggage as you may need to allow up to two hours in addition to your advised check in time. Long queues will not be accepted as a reason for not obtaining a UK or EC Customs’ stamp on the refund document.
• If satisfied that all the conditions of the scheme have been met the Customs officer will stamp your VAT refund documents.

(b) Leaving the EC via another EC country:

If you are departing the EC via another EC country, you must present the goods and the refund document to the Customs authorities of that country.

(c) Leaving the EC on a through (transit) flight via another EC airport:

There are special rules for goods being carried on through flights leaving via another EC airport:

• Hand Baggage: Goods carried as hand baggage must be produced with the refund document to Customs in the last EC airport before leaving to return home.
• Hold Baggage: Goods carried as hold baggage must be produced with the refund document to UK Customs before you check in your baggage.

7.5.3 What should I do if there is no Customs presence?

In most cases you will be able to locate a Customs officer to stamp your refund document. However, some ports and airports do not have a 24-hour Customs presence and at others the Customs export offices are open only when there are departures for immediate destinations outside the EC. At such places there will either be a telephone to speak to Customs or a clearly marked post box to deposit your refund document. You must ensure that your refund document is fully completed and that the reply paid envelope is not sealed before it is placed in the deposit box. Customs will collect it and if satisfied that all the conditions of the scheme have been met, they will stamp it and send it to the retailer or refund company to arrange your refund.

Remember, if you are travelling to an EC airport where you will transfer to a flight out of the EC, you must produce the goods carried in your hand baggage and the refund form to Customs at the last point of transfer before departure from the EC.

7.5.4 Am I making a declaration to Customs when I present the VAT refund document to the Customs officer?

Yes, you are making a declaration that:

• you are eligible to use the scheme; and
• that all the goods shown on the document are being exported from the EC by you.

It is a very serious offence to make a false declaration. This may involve you missing your flight or sailing and the misdeclared goods may be seized and penalties imposed.

7.5.5 What should I do if I decide not to export all of the goods bought under the scheme?

If you decide to leave goods bought under the scheme in the EC, you must clearly delete those items from any VAT refund document for certification when you finally leave the EC. This amendment must be made before you present the VAT refund document and the remaining goods to Customs for examination and stamping. The VAT refund document must show only the items being exported.

7.5.6 What happens if I cannot produce the goods and /or get the VAT refund document stamped before I leave the EC?

You will not receive any refund of VAT. If, however, you cannot produce the goods because, for example, your baggage has been lost or mislaid, you must tell the Customs officer at the port or airport of departure from the EC. The officer will tell you what action to take.

Your refund document must be stamped by a Customs officer when you leave the EC. Certification by anyone other than an EC Customs officer when you leave the EC is not acceptable. Long queues at the airport will not be accepted as a reason for not getting a UK or EC Customs’ stamp on the form. Forms stamped outside the EC are not acceptable.

7.6 Obtaining your refund

Methods for the payment of refunds are set out at paragraphs 7.6.1 and 7.6.2. Whichever method is used, it should have been agreed between you and the retailer when you bought the goods.

Your refund may be reduced by an administration charge. This charge should be clearly shown on your refund document.

If you do not receive your refund within a reasonable time you should write to the retailer - not to Customs and Excise.

7.6.1 How do I obtain my refund?

After your VAT refund document has been stamped and returned to you by Customs you can either:

• post the refund document back to the retailer to arrange payment of your refund; or
• post the refund document back to a VAT refund company to arrange payment of your refund.

7.6.2 Can I obtain a cash refund at the airport?

Not all retailers and airports offer this “Cash Service”. The retailer will advise you whether a cash refund is available. In such circumstances you will be advised to hand your refund document to a cash refund booth to arrange immediate payment.

The refund document will be passed to Customs by the cash refund booth. After stamping by Customs the form is sent to the retailer or refund company as evidence that the goods have been exported.

7.7 Lost refund documents

7.7.1 What should I do if I have lost the VAT refund document before stamping?

If the refund document is lost before stamping you should ask the retailer to provide a duplicate document. This must be clearly headed up “DUPLICATE”. Produce the duplicate document with the goods to the Customs export officer when you leave the EC. If you find the original refund document later - destroy it.

7.7.2 What should I do if the VAT refund document is lost after stamping?

If the refund document is lost after stamping, unless you can produce a photocopy of the stamped refund document you will not receive a refund of VAT. If, however, you can provide a photocopy of the VAT refund document stamped by Customs at your final departure point from the EC, you can return this to the retailer and ask for a duplicate refund form to be issued and sent for stamping to the original Customs office. The document must be clearly headed up “DUPLICATE”.

7.8 What should I do if I bring the goods back into the EC?

If the goods are brought back into the EC at any time they must be declared to Customs in the importing EC Member State - unless they are within the duty or tax-free traveller’s allowance limits of that Member State.

However, if you purchased goods as an entitled EC resident (see paragraph 2.4.3) or as a student or migrant worker (see paragraph 2.4.2) and re-import them within 12 months of your departure from the EC, duty and tax free allowances will not apply to the goods as you will have failed to remain outside the EC for at least 12 months. You will have to pay any import duties, including VAT that are due.

8. Intra EC Cruises - special arrangement

8.1 Why is there a need for a special arrangement?

Non-EC passengers on wholly intra EC cruises may not have access to their luggage and purchases made under the VAT Retail Export Scheme from disembarkation until they arrive at their final non-EC destination. They cannot, therefore, produce their goods and VAT refund document to the Customs officer for stamping at their point of final departure from the EC.

Therefore, for wholly intra EC cruises which commence within the UK and where the final port of disembarkation is also within the UK, a special arrangement was introduced on 1 July 2003.

8.2 What is the special arrangement?

8.2.1 Individual purchases below £1000

Cruise operators may produce an omnibus bulk refund document for all eligible goods, below £1000 per item, purchased on board by entitled individual passengers.

The omnibus refund document must accompany the individual passenger’s luggage to the airport of departure.

If satisfied the Customs officer will stamp the bulk refund form and return it to the cruise operator. On receipt of the certified bulk refund form, the cruise operator must account for the sales in their VAT records, as explained in Section 5.

8.2.2 Bulk refund documents

The format of the bulk refund document must be approved beforehand by Customs. (See paragraph 4.6 for details).

It must be clearly headed “Retail Export Scheme” and must only include those goods that:

• were sold on board the vessel;
• are eligible to be supplied under the VAT Retail Export Scheme (see paragraph 2.6); and
• were supplied to entitled customers (see paragraph 2.4).

It must also give the following details:

• your name, address and VAT registration number;
• your customer’s name and usual address;
• your customer’s passport number and country of issue;
• a description which clearly identifies the goods and the quantity involved; and
• the amount payable per item. (Where this includes VAT, the amount payable inclusive of VAT and the amount of VAT included in the total price should be shown).

In addition, it must include a retailer declaration as stipulated on the Form VAT 407 signed by a responsible ship’s officer, and a separate box not less than 5 cm by 3.5 cm for official certification by Customs and Excise.

8.2.3 Individual purchases £1000 and above

The normal VAT 407 form or equivalent (see paragraph 4.1) must be completed for purchases of £1000 or more per item. The customer must produce the goods and the form for stamping to the Customs officer at the point of final departure from the EC.

9. Fiscal (VAT) Territory Of The European Community

9.1 Countries and territories within the EC fiscal (VAT) area

The following countries and territories are within the EC fiscal (VAT) area:

• Austria
• Belgium
• Cyprus*
• The Czech Republic
• Denmark, except the Faroe Islands and Greenland
• Estonia
• Finland
• France, including Monaco
• Germany, except Busingen and the Isle of Heligoland
• Greece
• Hungary
• The Republic of Ireland
• Italy, except the communes of Livigno and Campione d’Italia and the Italian waters of Lake Lugano
• Latvia
• Lithuania
• Luxembourg
• Malta
• The Netherlands
• Poland
• Portugal, including the Azores and Madeira
• The Slovak Republic
• Slovenia
• Spain, including the Balearic Islands but excluding Ceuta and Melilla
• Sweden
• United Kingdom and the Isle of Man

*The European Commission has advised that the application of the 6th VAT Directive (Directive 77/388/EEC of 17 May 1977) shall be suspended in those areas of Cyprus in which the Government of the Republic of Cyprus does not exercise effective control. Eligible goods to entitled customers going to these destinations may be sold under this scheme.

9.2 Countries and territories outside the EC fiscal (VAT) area

The following countries and territories are outside the EC fiscal (VAT) area:

• The Channel Islands
• Andorra
• San Marino
• The Aland Islands
• The Canary Islands
• The overseas departments of France (Guadeloupe, Martinique, Réunion, St Pierre and Miquelon and French Guiana)
• Mount Athos
• Gibraltar
• The Vatican City

If you need more information on the VAT territory of the EC, please contact the National Advice Service on 0845 010 9000. (See the inside front cover for details).

Do you have any comments?

We would be pleased to receive any comments or suggestions you may have about this notice. Please write to:

HM Customs and Excise
Penalties, Exports and Supplies in Warehouse Team
4th Floor SW, Queens Dock,
LIVERPOOL
L74 4AA

Please note this address is not for general enquiries. You should ring our National Advice Service about those.

If you have a complaint or suggestion

If you have a complaint please try to resolve it on the spot with our officer. If you are unable to do so, or have a suggestion about how we can improve our service, you should contact one of our Regional Complaints Units. You will find the telephone number under ‘Customs and Excise - complaints and suggestions’ in your local telephone book. Ask for a copy of our code of practice ‘Complaints and putting things right’ (Notice 1000). You will find further information on our website at http://www.hmce.gov.uk.

If we are unable to resolve your complaint to your satisfaction you can ask the Adjudicator to look into it. The Adjudicator, whose services are free, is a fair and unbiased referee whose recommendations are independent of Customs and Excise.

You can contact the Adjudicator at:

The Adjudicator's Office
Haymarket House
28 Haymarket
LONDON
SW1Y 4SP

Phone: (020) 7930 2292
Fax: (020) 7930 2298
Email: adjudicators@gtnet.gov.uk
Internet: http://www.adjudicatorsoffice.gov.uk/

Update 1 issued January 2007

On 1 January 2007 Bulgaria and Romania will join the European Union. The total number of Member States will rise to 27.

• Enlargement will affect VAT and Excise registered businesses involved in International trade and the travelling public.
• Businesses will need to be aware of which countries have joined, and should treat goods entered with Customs on or after 1 January 2007 for physical removal to these countries as they treat trade with existing Member States.
• The travelling public should be aware that they will no longer be able to obtain VAT refunds nor purchase goods free of VAT in the UK for physical removal to Bulgaria or Romania on or after 1 January 2007.

This update provides information on consequential amendments to be included in paragraphs 2.5 and 9.1.

It also includes amendments to correct paragraph 4.3.1 and to clarify the information in paragraphs 4.4 and 5.2.

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