Q&A: work on goods for export

In our regular Q&A series from Croner Taxwise, senior VAT consultant, Vivienne Scott explores what conditions need to be met for work on goods for export to be zero-rated

Q. My client is a real motor enthusiast and he has developed his knowledge and skills into a business of restoring classic cars. He has a worldwide reputation, so recently restored one for an owner in the US. The car was shipped into the UK for my client to work his magic on it and will then be shipped back out to the States. I have read in Notice 741A (on the place of supply of services) that where goods are worked on for a private customer (B-C) this is to be treated as supplied where the work is actually carried out. This would make the supply subject to UK VAT, but the customer disagrees. Am I missing something?

A. Yes. You are correct in your understanding of the Place of Supply but having established that, it is necessary to consider the liability. Supplies in the UK can be standard rated, reduced rated, zero-rated, or exempt.

Notice 741A in section 16 sets out the circumstances when certain services carried out in the UK are zero-rated. The services potentially covered by this rule are:

  • intermediary services;
  • training performed for overseas governments; and
  • work on goods for export.

Work on goods for export from the EU is zero-rated provided the following conditions are met:

  1. The goods on which the work is to be carried out must have been obtained, acquired into, or imported to the EU for the purpose of being worked on. This means that if a car from the US was being used in the UK and broke down and needed repair, this would not qualify for zero-rating even if it would then be exported. However, in your client’s case, the car has been imported specifically to be worked on, so this condition would be met.
  2. The goods must not be used in the UK between the time of leaving the supplier’s premises and exportation.
  3. On completion of the work, the goods are intended to be, and are, exported from the EU by either the supplier, or someone acting on his behalf or, if the customer belongs outside the EU, by the customer or someone acting on his behalf. Your client would need to obtain and keep satisfactory official or commercial evidence of the export. There is no specific time limit for the export.

Therefore, as long as your client is able to meet these, he should zero rate the supply.

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