"VAT and overseas buyers?" Topic

As someone who has lived outside the UK for many years now, I was wondering about what is the situation of VAT on figures purchased by overseas customers from UK Companies.

I thought such sales were VAT free, whereas as UK/EU wide sales are inclusive of 18% VAT?

If there is no VAT on overseas sales do manufacturers pass on the savings, or maybe discount postage or some such(neither of which I have ever seen) or do they just pocket the extra.

I dont know the answer and was just curious….

Manufacturers that are registered for VAT must deduct the VA on overseas (outside the EU) sales as they cannot charge VAT on those sales.

Some people offer reduced postage, but you also have to understand that very few manufacturers are big enough (over 64k turnover) to be VAT registered anyway.

Mike

TMP link

Some companies look after you. Most don't.

(over 64k turnover) to be VAT registered anyway.

Ah I hadn't appreciated there was a cut off limit.

Though 64k turnover doesnt sound a lot, (in general business terms I mean).

I was thinking about this in relation to another thread about postal charges, and thinkig about some companies that hit you with +40% of the order for postage and I was thinking hey wait a minute, arent they making 18% extra of not needing to charge VAT anyway…

"Some companies look after you. Most don't."

That's an interestingly loaded and ill-informed answer given that *most* wargames firms are too small to be VAT-registered, and so couldn't possibly deduct the VAT that they don't charge anyway….

Dom.

VAT is not 18%:

"There are 3 rates of VAT:

* a standard rate, currently 17.5%
* a reduced rate, currently 5%
* a zero rate."
customs.hmrc.gov.uk

As for £64K not sounding a lot, for a retailer it isn't, but for a cottage industry manufacturer it is – many firms are a single person, frequently working a day job as well, and don't turn over an awful lot at all….

Dom. (Who seriously doubts he'll ever have to worry about VAT-registration….)

Oh, and good point on the zero rate – it's largely irrelevant to wargamers, but definitely worth noting that books are zero-rated, so you should never be charged VAT on them.

Dom.

What can I say to you Dom? I love you too much. Give me a hug.

LOL – OK, maybe I'm a bit grouchy this morning – hug accepted…. ;-)

Just watch where you put that banana

I'm told by the accountants that we can only deduct VAT if supplying registered companies overseas.

Doug

"I'm told by the accountants that we can only deduct VAT if supplying registered companies overseas."

Then your accountants obviously haven't read this:

"2.2 Why does zero-rating apply to exports?

VAT is a tax levied on goods and services consumed in the EC. When goods are exported they are "consumed" outside the EC and to impose VAT on such goods would be contrary to the purpose of the tax. Therefore, the supply of exported goods is zero-rated provided certain conditions are met."
link

You do need to read the rest of the link I posted, but it certainly doesn't make any distinction between a registered company outside the EC and an individual for zero-rating VAT on exports.

Strange

I am – very…..

Then your accountants obviously haven't read this:

Oh yes they have…….

Actually, Mike and Justin, the accountant's advice is not based on the regulations – it's based on practicality. You'll notice that the extract from HM Revenue and Customs talks of "certain conditions" and there's the rub. To comply with the "certain conditions" requires extra costs. The choice is to take off the VAT but charge for the extra handling or leave it as it is.

It's simpler to leave it as it is and probably still cheaper for the purchaser than paying for the extra admin. It means we don't have to do even more paperwork and can spend the time doing useful things like getting our orders out in what many TMP posters (and others) consider to be record time.

Doug

Jon at GZG does not charge VAT to overseas customers:

VAT deductions: VAT (Value Added Tax, or "Vague Additions to Total" ) is a European sales tax that is payable ONLY by EU residents (including us in the UK). VAT at the current UK rate of 17.5% is already included in the list prices of our models and figures (it is not charged on books). If you are resident OUTSIDE the EU, then we can ship your order without charging you the VAT – this equates to a 14.9% discount off the list prices. We will calculate the price reduction for those orders being shipped to destinations outside the European Union. Please note that there is no reduction on BOOKS, as these do not carry VAT in the first place. Be aware that your local Customs may or may not charge you something in duties and/or local taxes on the package on arrival.

link

If he can do it (a one man and a dog operation), I'm sure you can.

In fact, it may well be illegal to charge VAT to non EU customers!

"To comply with the "certain conditions" requires extra costs."

What extra costs?

I get the feeling the 'certain conditions' is referring to certain items not attracting VAT, ie education items, not to certain conditions you have to undertake (incurring, possibly, extra costs).

Please note the regulations quoted by Justin don't apply to posted parcels. These apply:

7.5 Postal exports

Goods exported by post may be zero-rated if they are direct exports and you hold the necessary evidence of posting to an address outside the EC.

(a) Evidence of posting for letter post or airmail (packages up to 2kg)

A fully completed certificate of posting form, presented with the goods for export, and stamped by the Post Office will be your evidence of export. Acceptable forms are:

* Form C&E 132 for single or multiple packages taken to the Post Office. Blank forms may be obtained from our National Advice Service or from our Internet site.
* Form P326 available from the Post Office and used for single packages taken to the Post Office.

Also acceptable is:

* A Certificate of Posting for International Mail, or a Royal Mail Collection Manifest, available from a Royal Mail sales advisor, for use by customers using their Business Collections Service, where the Royal Mail collection driver signs the certificate.

What extra costs?

Time. Very expensive.

Doug

We are VAT registered and don't charge VAT but have found the the differnce normaly covers most of the cost of postage, although some of our larger cases go out in 3 parcels.

As far as we have been told we as long as the parcel is going over seas then you should not charge VAT, please tell me I have not been doing this wrong?

Jules

I agree cherrypicker: any VAT paid on non-EU orders usually goes on airmail and insurance.

Doug: I'd have a word with your accountant. He's given you poor advice for regular retail orders. I can see them being correct if you are exporting large amounts though.

I can see them being correct if you are exporting large amounts though.<

We are..!

Doug

Somone agrees with me, it must be my birthday :-)

Next you will tell me I won the Lottery :-)

Jules

Vexillia – great summary thanks; makes it seem a lot simpler….

Dom.

"I can see them being correct if you are exporting large amounts though."

How?

Large amounts will get exported via a shipper and not the Royal Mail. Think large as in 25 kg to tonnes.

I've just re-read the thread. Large amounts means large single consignments not lots of small parcels.

I think it'll depend on the method of export. Having had a Google and a good read, anyone in the UK looking at the issue should have a thorough read of Notice 703 on the HMRC site: link Sections 7.5 and 7.6 cover exports by post (including Parcel Farce) and courier respectively, which I'd imagine accounts for most of the wargames "industry" – the more complicated documentation only seems to come into play when you're talking containers rather than parcels….

Dom.

"a thorough read of Notice 703 on the HMRC site: "
Yes, that's right. I quoted it and linked to it in my 4:10am post above!

I really think that if anyone charges VAT on products sold to customers outside the EU, which then is paid to HMRC as VAT on sales then you could be guilty of fraud. You are effectively forcing a non-EU resident to pay an EU only tax.

Just my 2p's worth (no VAT, my turnover is not high enough!)

"Yes, that's right. I quoted it and linked to it in my 4:10am post above!"

Didn't spot the link at the bottom!

"I really think that if anyone charges VAT on products sold to customers outside the EU, which then is paid to HMRC as VAT on sales then you could be guilty of fraud. You are effectively forcing a non-EU resident to pay an EU only tax."

Could well be right, but I believe you *are* allowed to quote prices as "inclusive of VAT where applicable", in which case a £1.00 GBP item is 85p plus VAT to customers in the EC and £1.00 GBP no VAT for those outside of it – they're not paying tax, you're just charging them more for being foreigners….

Dom.

As I said earlier, some companies look after foreigners, most don't.

any VAT paid on non-EU orders usually goes on airmail and insurance.

vexilla, I would dispute that that is happening.

a £1.00 GBP GBP item is 85p plus VAT to customers in the EC and £1.00 GBP GBP no VAT for those outside of it – they're not paying tax, you're just charging them more for being foreigners….

Dom Skelton your right, and that was how I percieved the situation in general as a "foriegner" when I started this thread.

blackmama: you can dispute things all you want however it won't change the facts.

But to emphasise the point again – *most* firms aren't VAT-registered anyway; the relative handful that are have differing policies, so you need to look at specifics:

Dom Skelton your right, and that was how I percieved the situation in general as a "foriegner" when I started this thread.

Except that I *didn't* say this is happening – merely that it's legitimate to handle the situation in that way. I would be surprised if more than a handful of wargames firms actually fall back on such a strategy. (I'd also be very surprised if more than 10% of wargames manufacturers are even VAT-registered anyway….)

Put simply you need to look at specific companies and ask what they do; tarring everyone wityh the same brush is woefully inaccurate and unfair.

Dom.

Dom,
I didnt mean to imply they were or are doing that, I meant that my "perception" as an "overseas buyer" was that, when the thread started.

However from this thread I have learnt that many/most of the companies may not be registered for VAT, I am surprised at that, being only a "consumer" without any knowledge of the "industry", but I accept it.

This thread has changed my perception, I think.

Vexilla,
What I meant was that every purchase I have ever made from the UK (or anywhere else for that matter) has incurred postage charges equal to or exceeding the actual postage cost.

So I dont see how any VAT saving are being applied to cover postage, althoutgh as Dom says most/many of these companies maybe not be registered for VAT so there is no saving to apply.

One example:

A friend of mine applied the equivalent discount to overseas postage once he became VAT-registered.

The business then became rather too big for a one-man-band to handle, so he split the business, is now no longer VAT-registered and the postage prices have gone back up again.

Re postage charges: My friend mentioned above only charges customers' credit cards AFTER he has been to the post office and dipatched the items. He then applies the exact amount of the postage, plus a little for packaging and transporting it to the post office. It's a shame that more companies can't do this.

However, when paying by cheque, or ordering on-line, it's not possible to do this, as the amount to be paid has to be determined and agreed in advance, so the supplier has no choice but to apply an arbitrary 20% (or whatever) to cover the costs.

I suppose that an online store could theoretically calculate the weight of goods and accurately determine the postage charge…?

RMD,
I'm pretty sure that Redoubt knock off the VAT and only charge shipping at cost (or close to). The prices on their website are exclusive of VAT and the total fee is only applied to your credit card when they know how much the shipping will be.

Great service in my opinion, and I'd be surprised if Redoubt are VAT registered (though they must be not to charge it).

As an aside if you order something within the US and don't live in the state in which the order is coming from you don't pay that state's sales tax nor your own. Why is the UK any different with regard to VAT on non-EU orders sold by VAT registered vendors?

blackmama: it works like this -

Say the order is £20.00 GBP including VAT plus £3.25 GBP including VAT again for postage to the UK. For non-EU customers the order is £17.00 GBP excluding VAT plus £6.25 GBP for airmail and insurance.

Remember airmail costs a lot more than UK mail. For example 0.5 kg costs £1.84 GBP in the UK whilst it is £5.72 GBP airmail outside Europe.

So as everyone in the trade has told you in this thread it usually balances out.

Vexilla:

Remember airmail costs a lot more than UK mail

LOL well as I live overseas that is something I am only too painfully aware of, a large percentage of my gaming budget goes in paying postal charges sadly.

However I dont think that everyone in the trade has spoken with one voice as you seem to imply, in fact there seems to be a complete muddle, some thinking you should charge VAT, others you shouldnt, other charge because they cant be bothered with the paper work, others saying there isn't any extra paper work and others saying most wargame related companies arent even registered for VAT in any case.

Looking at that the Vexilla site today I see it does essentially repeat what you have said above which is great. That had confused me because when I bought something recently using your online store I apparently paid the VAT inclusive price and a shipping charge on top, tiny order so no big deal, but now I know for the future its probably best to email the order instead of using the store to avoid that happening.

"…in fact there seems to be a complete muddle…"

By far the best summary anyone's posted…. The best bet is quite simply to ask a firm that you're planning on dealing with – drop 'em an email saying "I'm planning on making an order – are you VAT-registered, and if so do you deduct VAT?" That's the only way you're going to get a definite answer….

Dom.

so the supplier has no choice but to apply an arbitrary 20% (or whatever) to cover the costs

We make an annual loss on our postage, but customers don't want to pay the actual cost :-D

I suppose that an online store could theoretically calculate the weight of goods and accurately determine the postage charge…?

There is a facility for doing this on our website, but to do it we need to weight every item and include the weight in the description (3500 items later…)

The 'system' then calculates the weight of the parcel, applies a tare weight (packing) and uses a table to calculate the cost. The table needs changing every time the post changes (going up in April).

And that's not as simple as it sounds there.

When doing the 'new' system for my magnetic bases I decided to go for fixed price packs but the amount of calculation required quite a complex spreadsheet to cope with the differing weights of different sized bases. Where you are shipping a large range of fairly heavy items, all of different weights, it is no joke trying to work out in advance what is a 'fair' price to charge for P&P (fair to BOTH sides of the deal) and getting it wrong can be financially crippling to a small concern.

Tony H
tinytintroops.co.uk