The added value of considering your VAT obligations

Hazel Yeoman is a Partner at Brebners Chartered Accountants. With a particular interest in the fashion sector and expertise in management accounts and VAT returns, Hazel discusses ways of keeping the VAT man happy.

The fashion industry is one that has many VAT reporting requirements to consider. Running your own label can be difficult at the best of times, and juggling those responsibilities with VAT requirements is tricky. Think about it – there are imports, exports, arrivals, departures, zero-rated supplies, acquisition VAT, EC sales lists, Intrastat … the list goes on.

Are you confident that your invoices are being raised correctly? Are you sure you’re complying with all the necessary VAT reporting applicable to your business? Below, there is an overview of some of the VAT reporting requirements that start-ups and growing businesses need to consider.

Imports and form C79

A shipment into the UK from outside the VAT territory of the EU

The monthly import VAT certificate (C79) should be used as evidence to claim back the import VAT as input tax.

Exports

A shipment from the UK to a place outside the VAT territory of the EU

To zero-rate these sales, the goods must be exported within three months. Evidence of the export should be obtained.

Retail exports

Sale of goods to overseas customers for export in hand luggage

Retailers can complete form VAT 407 to allow overseas visitors to claim a VAT refund when they leave the UK.

Arrivals/acquisitions

Receipt by VAT-registered person in the UK of goods from a supplier in the EU

The purchaser should provide their VAT number to the supplier and should account for VAT as if the goods had been bought from a UK supplier.

The VAT is included in boxes 2 and 4 of the VAT return and the value in boxes 7 and 9. No liability for VAT is therefore incurred.

Dispatches/EC sales

Goods supplied to another EU country are known as dispatches or removals

These sales are also known as intra-EC supplies and are zero-rated as long as the goods are removed from the UK. The customer must be VAT registered and the sales invoice should show the customer’s VAT number, together with the wording ‘this is an intra-EC supply’.

The value is included in boxes 6 and 8 of the VAT return.

EC Sales Lists (ECSL) (goods and services)

A report of sales of goods and services to VAT registered customers in other EU member states

Report on a quarterly basis or monthly if the value of goods sold is greater than £35,000 in any quarter.

Submission due online within 21 days of the month end date.

Intrastat (goods only)

Method of collecting information and producing statistics on movement of goods between EU member states

If your trade in goods within the EU exceeds the limits below you must submit monthly Intrastat Supplementary Declarations.

Limits per calendar year:

Arrivals – £1.5 million
Dispatches – £250,000

Submission due no later than the 21st of each month.

Distance selling

Sale of goods to unregistered purchasers in other EU member states which exceeds the distance selling threshold for that member state

If your customer is not VAT registered then you should normally charge VAT.

All businesses should monitor sales to private individuals (B2C) and unregistered businesses. If they exceed the distance selling threshold for that member state they will need to register for VAT in that state.

Final thoughts

The various VAT rules are extremely detailed and often rather lengthy. The above is only designed to give a brief overview of the VAT obligations that you might need to consider. Getting it right from the beginning and ensuring that your accounting software can provide you with the necessary reports is key.

Brebners can provide further advice in this area so that you can rest easy, safe in the knowledge that you are keeping the VAT man happy while you are focusing on your brand.