A UK business can zero-rate VAT on goods it exports, but only if it meets the conditions in HMRC’s VAT Notice 703 in full. The central conditions are that the goods are exported within the time limits, which are triggered by the time of supply, and that you obtain and keep evidence proving your entitlement to zero rating. If the goods are not exported in time, or you have not retained the necessary evidence of physical export, HMRC says you must not zero rate the supply and must account for VAT at the appropriate UK rate.
What does VAT Notice 703 cover?
According to HMRC, VAT Notice 703 applies to supplies made on or after 1 January 2021 of goods exported out of the UK from Great Britain, and of goods exported from Northern Ireland to non-EU destinations. Under the notice, the supply of exported goods is zero-rated provided the conditions in the notice are met, and HMRC states that those conditions must be met in full for exported goods to be zero-rated.
You can use an agent, such as a freight forwarder, to handle export transactions. HMRC is clear, though, that the responsibility to make sure the rules in the notice are followed lies with you at all times, even if you employ an agent.
Which export supplies can be zero-rated?
HMRC’s notice sets out how the customer and the use of the goods affect whether a supply can be zero-rated:
- Business customer not established in the UK: the supply may be eligible for zero rating as an indirect export, even if that customer is VAT registered in the UK.
- Customer established in the UK: your supply cannot be zero-rated, but the customer’s subsequent removal of the goods may be treated as the export of its own goods (HMRC points to paragraph 2.13 of the notice).
- Goods for the customer’s personal use: you cannot zero rate a supply where the goods are intended for the customer’s non-commercial (personal) use and will be indirectly exported by them in accompanied baggage (paragraph 7.3 of the notice).
Where a single movement of goods involves a chain of transactions, HMRC says only the person selling to the overseas recipient can zero rate their supply, regardless of who arranges the export.
For indirect exports, HMRC also states that the goods must not be used between the time they leave the supplier’s premises and export, except where specifically authorised elsewhere in the notice or in any other VAT notice.
What evidence of export does HMRC require?
HMRC says you must obtain and retain evidence to prove entitlement to zero rating. The evidence can be official or commercial, and it must be supported by evidence of supply.
Official evidence, as HMRC defines it, is an export declaration for the goods submitted to the Customs Declaration Service (or CHIEF/NES until July 2024) which has generated a departure confirmation. For official evidence you will need the Movement Reference Number (MRN) or Declaration Unique Consignment Reference (DUCR) of the declaration.
- All of your evidence must provide a clear audit trail of the goods from sale to export.
- For indirect exports, evidence must show the goods you supplied have left the UK, and copies of transport documents alone will not be sufficient.
HMRC says it is essential to establish at the time of sale what type of export documentation will be sent to you to support the zero rating of your supply.
How do the time limits for zero rating work?
HMRC sets time limits both for exporting the goods and for obtaining evidence of export. In all cases, HMRC says, the time limits are triggered by the time of supply.
- If you have not exported the goods within the time limits, or have not retained the necessary evidence that they were physically exported, you must not zero rate the supply and must account for VAT at the appropriate UK rate.
- You must include that VAT in box 1 of your VAT Return for the period in which the relevant time limit expires.
- If acceptable export evidence arrives later, you may zero rate the supply and adjust your VAT account in the period in which that evidence is received.
Where you rely on your buyer to send export evidence, HMRC mentions securing against the possibility that the buyer fails to provide it, for example by taking a deposit from your customer equal to the VAT you will be liable to pay if the evidence is not sent to you.
How long must you keep proof of export?
HMRC says proof of export must be retained for 6 years and made readily available to any visiting VAT officer to prove the zero rating of your exports.
Channel Islands, free zones and margin-scheme vehicles
- Channel Islands: supplies of goods sent to the Channel Islands are regarded as exports and may be zero-rated if the conditions in Notice 703 are met.
- Free zones: Freeports, known as Green Freeports in Scotland, have no special status for VAT export purposes.
- Second-hand motor vehicles: you cannot zero rate the export of a motor vehicle sold under the second-hand margin scheme.
For other export topics, browse the UK export guides.
When to get specialist help
This post doesn’t cover every situation. Consider getting advice in these cases:
- Goods moving from Northern Ireland: ask HMRC or an accountant which guidance applies to your movements.
- Chains of sales where several businesses are involved in one movement of goods: ask an accountant or VAT adviser.
- Removals of your own goods, or sales to travellers taking goods in their baggage: check with HMRC.
- Export declarations, departure confirmations and references such as MRNs: ask a customs broker or freight forwarder.
- Missed time limits, late evidence or corrections to VAT Returns: speak to an accountant.
Related reading
Sources
Checked against the official sources above on 26 October 2026. Rules and forms change, so confirm the current version on the official page before you act.