How Does VAT Work When Selling Goods Outside the UK?

If your UK limited company sells physical goods to customers outside the UK, the VAT treatment is different from an ordinary domestic UK sale.

In many cases, goods that are genuinely exported from the UK can be zero-rated for UK VAT, provided the relevant HMRC conditions are satisfied and your company keeps appropriate evidence of export.

However, selling to an overseas customer does not automatically mean you can apply 0% VAT.

The VAT treatment depends on factors such as:

where the goods are located;
where the goods are delivered;
who arranges the export;
whether the goods actually leave the UK;
whether you retain evidence of export;
whether the goods leave Great Britain or Northern Ireland; and
whether you create VAT obligations in the destination country.

This guide explains how VAT works when a UK company sells goods outside the UK.

What Is an Export for UK VAT Purposes?

An export generally involves goods physically leaving the UK and being supplied to a destination outside the relevant UK VAT territory.

For a business operating from Great Britain — England, Scotland or Wales — goods sent to countries outside the UK, including EU countries, are generally treated as exports.

For example:

UK warehouse

↓

Goods sold

↓

Goods shipped to USA

↓

Goods physically leave the UK

This may potentially qualify as a zero-rated export.

Northern Ireland has separate VAT rules for certain goods moving between Northern Ireland and EU member states.

Does a UK Company Charge VAT on Exports?

Most qualifying exports from Great Britain to destinations outside the UK can be charged at 0% UK VAT where HMRC's conditions are satisfied.

For example:

Goods: £5,000

UK VAT at 0%: £0

Customer pays: £5,000

The important point is that this is a zero-rated taxable sale.

It is not the same as a VAT-exempt sale.

What Does Zero-Rated Mean?

Zero-rating means the supply remains within the VAT system, but VAT is charged at 0%.

This means the company can generally still:

record the sale as a taxable supply;
include it in its VAT records;
report it appropriately on its VAT Return; and
potentially recover VAT on qualifying expenses connected with its taxable activities.

Therefore:

Zero-rated ≠ exempt

and:

Zero-rated ≠ outside the scope of VAT

These distinctions matter for VAT reporting.

Example: UK Company Selling Goods to the USA

Imagine a UK VAT-registered company sells machinery to a customer in Texas.

The goods are shipped:

Birmingham → Texas

The invoice could potentially show:

Machinery: £10,000

UK VAT: 0%

Total: £10,000

If the company satisfies the export conditions and retains appropriate export evidence, the sale can generally be zero-rated for UK VAT.

The US customer may separately have to deal with customs duties, import taxes or other charges when the goods arrive.

Those are not UK VAT.

Example: UK Company Selling Goods to France

Suppose a company in England sells products to a customer in France.

The goods physically move:

England → France

For a Great Britain business, this is generally treated as an export.

If the relevant conditions are satisfied, the sale may potentially be zero-rated for UK VAT.

The customer or seller may then need to deal with EU import VAT and local VAT procedures.

Do I Need Evidence That the Goods Left the UK?

Yes.

This is one of the most important rules for zero-rated exports.

HMRC requires businesses to get and keep appropriate evidence that the goods were actually exported.

Evidence can potentially be official or commercial.

Depending on how the goods are transported, records could include:

customs declarations;
courier documentation;
freight-forwarder records;
bills of lading;
airway bills;
shipping records;
certificates of posting;
transport documents;
customer delivery evidence; and
other commercial evidence showing that the goods left the UK.

The evidence should clearly connect the exported goods with the relevant sale.

How Quickly Must Goods Be Exported?

Under HMRC's general export rules, goods should normally be exported and valid evidence obtained within 3 months of the time of supply, although specific exceptions can apply.

The time of sale can depend on the relevant VAT tax-point rules.

Businesses should therefore avoid waiting until months after shipment to collect export documentation.

Keep the evidence as part of the original sales record.

What Happens If I Cannot Prove the Export?

If your company cannot demonstrate that the goods satisfied the zero-rating conditions, HMRC may require the company to account for UK VAT.

For example:

Sale price: £12,000

Your company treated the sale as:

0% VAT

But you cannot prove that the goods left the UK.

The company may then have to correct the VAT treatment.

This can be expensive if the customer has already paid and cannot be charged additional VAT.

Does the Customer Need to Be Overseas?

Interestingly, the customer's location is not always the deciding factor for a direct export.

HMRC's export guidance focuses heavily on the fact that the goods are exported and that the relevant export conditions are satisfied.

For direct exports, HMRC notes that the customer's location is not the relevant factor where the goods are exported under the supplier's control.

What matters is the actual movement of the goods.

What If an American Customer Has the Goods Delivered in the UK?

Then you may not have an export.

For example:

Customer lives in USA

but requests delivery to:

London hotel

The customer's nationality or residence does not automatically make the transaction an export.

If the goods remain in the UK, normal UK VAT treatment may apply.

What If a UK Customer Asks Me to Ship Goods Overseas?

A UK customer's address also does not necessarily prevent the transaction from qualifying as an export.

If the goods are genuinely exported under the relevant conditions, the VAT analysis should follow the actual movement and export arrangement.

Always focus on:

Where are the goods?

Where do they go?

Who arranges the export?

Do I have valid evidence?

What Is a Direct Export?

A direct export generally occurs where the UK supplier controls the process of exporting the goods.

For example:

UK company sells product

↓

UK company arranges courier

↓

Courier exports product

↓

Overseas customer receives goods

HMRC describes direct exports as transactions where the supply-to-export process is under the control of the UK supplier or owner of the goods.

What Is an Indirect Export?

An indirect export can occur where an overseas customer or their agent takes possession of goods in the UK and arranges the export.

For example:

US customer buys machinery

↓

Customer's freight company collects it in UK

↓

Freight company exports machinery to USA

Zero-rating may still potentially be available, but the conditions and evidence requirements are especially important.

Do not simply assume that the customer's promise to export the goods is sufficient.

What If the Customer Collects the Goods Personally?

This requires care.

If an overseas customer collects the goods from your premises and transports them abroad themselves, you need to ensure the transaction satisfies the relevant indirect-export conditions.

Appropriate evidence should still demonstrate that the goods actually left the UK.

If you cannot obtain adequate evidence, applying zero-rated VAT treatment can be risky.

What If My Goods Are Already Outside the UK?

This is a very different situation.

Suppose a UK limited company owns stock stored in a warehouse in Florida.

It sells a product to a customer in California.

The goods move:

Florida → California

They never leave the UK because they were already in the USA.

This is therefore not a UK export transaction.

The supply may instead fall outside UK VAT and create tax obligations in the United States.

The physical location of stock is therefore extremely important.

Ecommerce and Overseas VAT

Ecommerce businesses need to look beyond the customer's billing address.

Consider:

Where is the stock stored?

Where does the shipment begin?

Where is the customer?

Who imports the goods?

Which marketplace is involved?

Does the destination country require VAT or sales-tax registration?

For example, two sales through the same Shopify website may receive completely different VAT treatment:

UK warehouse → US customer

versus

US warehouse → US customer

The first can potentially be a UK zero-rated export.

The second is generally not.

Does Shopify Automatically Apply the Correct VAT?

Not necessarily.

Shopify can calculate taxes based on the settings you configure, but it cannot determine every legal aspect of your company's VAT position automatically.

Your company remains responsible for:

determining whether a transaction qualifies as an export;
keeping evidence;
applying the correct VAT rate;
recording the transaction correctly; and
considering overseas tax obligations.

Tax settings should therefore reflect the real supply chain.

What About Amazon FBA?

Amazon FBA can make the position more complicated because stock may be stored outside the UK.

For example:

UK company → sends inventory to US Amazon warehouse

Then later:

Amazon US warehouse → US customer

The eventual consumer sale is not itself an export from the UK.

Similarly, inventory stored in an EU fulfilment centre may create VAT obligations in the EU country where the stock is held.

Always know where your inventory is located.

What About Dropshipping?

Dropshipping can also be different from exporting goods from the UK.

Imagine:

UK company receives US customer order

↓

Chinese supplier ships directly to US customer

The goods move:

China → USA

not:

UK → USA

Therefore, the transaction is not simply a UK zero-rated export just because the seller is a UK company.

You need to consider the actual supply chain and relevant overseas tax rules.

Does a UK Company Charge VAT on EU Goods Sales?

For goods leaving Great Britain and going to an EU country, qualifying transactions are generally treated as exports and can potentially be zero-rated.

However, the EU customer may have to pay:

import VAT;
customs duty;
clearance charges; and
other applicable costs.

Who bears these charges depends on how the shipment and delivery terms are structured.

What About Northern Ireland and the EU?

Northern Ireland has special arrangements for goods moving between Northern Ireland and EU member states under the Windsor Framework. HMRC's current guidance treats these separately from ordinary Great Britain exports.

For example, qualifying supplies from Northern Ireland to VAT-registered EU customers may be zero-rated under specific rules, but reporting and evidence requirements apply.

Businesses trading through Northern Ireland should therefore not automatically apply the Great Britain export rules.

What About Northern Ireland to Non-EU Countries?

Goods exported from Northern Ireland to countries outside both the UK and EU are generally covered by the UK export rules in VAT Notice 703.

For example:

Northern Ireland → USA

can potentially be treated as an export under the normal export framework.

Who Pays Import VAT Overseas?

When goods arrive in another country, import VAT or a similar local tax may become due.

Who pays depends partly on:

destination-country rules;
customs value;
shipping terms;
importer of record; and
whether the seller or customer is responsible for import clearance.

The fact that the UK sale is zero-rated does not mean the customer receives the goods without tax.

What Is Import VAT?

Import VAT is VAT charged by the country into which goods are imported.

For example:

UK seller exports to France at 0% UK VAT

↓

Goods arrive in France

↓

French import VAT may arise

UK VAT and foreign import VAT are separate taxes.

What About Customs Duty?

Customs duty is also separate from VAT.

A shipment may potentially involve:

UK VAT: 0%

but still have:

Import VAT

Customs duty

Customs clearance fees

when it arrives overseas.

The amount depends on destination-country rules, product classification, origin and value.

What Do DDP and DAP Mean for VAT?

Shipping terms can affect who is responsible for import taxes.

Under some Delivered Duty Paid (DDP) arrangements, the seller takes responsibility for import duties and taxes.

This could potentially create foreign VAT-registration or reporting obligations for the UK company.

Under arrangements where the customer acts as importer, the customer may instead pay import charges when the goods arrive.

Businesses should understand these obligations before advertising “duties paid” or “tax included” international delivery.

Can a UK Company Need Overseas VAT Registration?

Yes.

Zero-rating an export from the UK does not prevent the company from creating tax obligations abroad.

Potential triggers can include:

holding stock overseas;
importing goods in the company's own name;
selling goods locally from an overseas warehouse;
using overseas fulfilment centres;
selling high volumes to consumers; or
using arrangements that make the company responsible for local taxes.

Businesses selling internationally at scale should review each important market separately.

Does a Zero-Rated Export Still Count Towards UK VAT Turnover?

Yes, zero-rated exports remain taxable supplies.

Therefore, they can still be relevant to your company's VAT-taxable turnover.

A business should not automatically exclude export revenue when monitoring whether it needs to register for UK VAT.

This is another important difference between zero-rated and exempt supplies.

Can I Reclaim VAT on Costs Related to Exports?

Because qualifying exports are zero-rated taxable supplies, a VAT-registered company can generally retain the ability to recover VAT on qualifying business expenditure associated with those taxable activities, subject to the normal input-VAT rules.

For example, a UK exporter may potentially recover eligible VAT on:

stock;
packaging;
equipment;
marketing;
professional services;
warehouse costs; and
other qualifying expenditure.

What Should an Export Invoice Show?

Depending on the circumstances, an export invoice may include information such as:

company name;
company address;
VAT registration number;
customer information;
invoice number;
invoice date;
description of goods;
quantity;
value;
VAT rate;
total amount;
shipping details; and
other customs-related information.

Where the export qualifies for zero-rating, the VAT treatment should be shown correctly.

Your records should make clear that the transaction is a zero-rated export rather than simply saying “no VAT.”

What Currency Can I Use?

UK companies can invoice overseas customers in foreign currencies.

For example:

USD

EUR

CAD

AUD

However, VAT records and reporting can require amounts to be converted into sterling according to HMRC's applicable currency-conversion rules.

Your accounting software should handle foreign currencies correctly.

What Export Records Should I Keep?

Keep records connecting the sale to the physical export.

These might include:

Sales invoice

Customer order

Courier or freight booking

Customs declaration

Evidence goods left UK

Delivery confirmation

This creates a clear audit trail.

For ecommerce businesses with thousands of exports, this process should ideally be automated as much as reasonably possible.

What Happens With Returned Exported Goods?

Returns and refunds can affect VAT records.

If a customer returns goods or the company issues a refund, the company may need to:

issue a credit note;
adjust the sales value;
update the VAT Return;
consider customs procedures for returned goods; and
account for any relevant import VAT when goods return to the UK.

Do not simply delete the original sale from your accounting system.

What If Goods Never Reach the Customer?

If goods are lost, rejected or returned during international transport, the VAT and customs treatment can depend on what happened to them.

Businesses should retain courier and insurance evidence explaining the outcome.

Significant lost shipments may require VAT and accounting adjustments.

Common VAT Mistakes When Selling Goods Overseas

Businesses should avoid:

assuming every foreign customer automatically gets 0% VAT;
applying zero-rating without evidence of export;
ignoring the three-month evidence requirement;
treating goods delivered within the UK as exports;
confusing zero-rated sales with exempt sales;
ignoring where stock is stored;
treating overseas warehouse sales as UK exports;
assuming dropshipped goods are UK exports;
relying completely on Shopify or Amazon tax settings;
ignoring import VAT and customs duties;
failing to consider foreign VAT registration;
misunderstanding Northern Ireland rules; and
failing to keep export documentation.

Export VAT Checklist

Before zero-rating an overseas goods sale, ask:

Are the goods physically in the UK?

Will they actually leave the UK?

Who is arranging the export?

Where are the goods being delivered?

Do the zero-rating conditions apply?

Do I have appropriate evidence of export?

Have I obtained the evidence within the required period?

Does Northern Ireland treatment apply?

Who will be the importer overseas?

Could foreign VAT or sales-tax registration be required?

This checklist can prevent many common mistakes.

Frequently Asked Questions

How does VAT work when selling goods outside the UK?

Goods genuinely exported from the UK can generally be zero-rated where HMRC's conditions are satisfied and the seller retains appropriate export evidence.

Do I charge VAT on goods exported to the USA?

Qualifying goods exported from the UK to the USA can generally be charged at 0% UK VAT where the export requirements are satisfied.

Do I charge VAT when selling goods to the EU?

For goods exported from Great Britain to an EU country, qualifying sales can generally be zero-rated. Separate rules apply to certain Northern Ireland–EU transactions.

Do I need proof of export?

Yes. Zero-rating depends on obtaining and retaining appropriate evidence that the goods left the UK.

How long do I have to get export evidence?

HMRC's general rule requires goods to be exported and valid evidence obtained within three months of the time of supply, subject to specific exceptions.

Does zero-rated mean VAT exempt?

No. A zero-rated export remains a taxable supply, but VAT applies at 0%.

What if the customer collects the goods?

The transaction may potentially qualify as an indirect export, but specific conditions and evidence requirements need to be met.

What if my stock is already overseas?

A sale of stock already outside the UK is not simply a UK export. The VAT or sales-tax rules of the country where the stock is located may apply.

Do exports count towards VAT turnover?

Yes. Zero-rated exports remain taxable supplies and can therefore be relevant to VAT-taxable turnover.

Can I still reclaim VAT if most of my sales are exports?

Potentially, yes. Zero-rated exports are taxable supplies, so eligible VAT on related business expenditure may generally remain recoverable under the normal rules.