Do I Need to Charge VAT If I Sell to Customers Outside the UK

Introduction

Since the UK left the EU, VAT on international sales follows new rules that separate trade with EU countries from trade with the rest of the world. The good news is that many sales to overseas customers are zero-rated for VAT purposes, meaning you do not charge VAT but can still reclaim input VAT on related costs.

However, to apply zero rating correctly, you must meet HMRC’s conditions and keep the right documentation to prove your goods or services qualify.

Selling goods outside the UK

When you sell goods to customers outside the UK, the VAT treatment depends on whether you are selling to the EU or to countries outside the EU.

Sales to customers outside the EU (exports)

If you sell and export goods to customers outside the UK and EU, the sale is usually zero-rated for VAT, provided that:

The goods are physically exported within three months of the sale date.

You keep valid proof of export, such as commercial invoices, shipping documents, and transport records.

This applies whether you are selling to a business or individual overseas.

Even though you do not charge VAT on the sale, you can still reclaim VAT on costs related to producing or selling the goods, such as materials or freight services.

Example

You sell handmade furniture to a customer in the United States for £2,000. The goods are exported within three months, and you keep copies of the shipping documents and customs forms. You charge 0 percent VAT on the sale but can reclaim input VAT on materials used to make the furniture.

Sales to customers in the EU

For goods sent to the EU, the rules depend on who the customer is:

If the customer is a business (B2B): The sale can be zero-rated if the customer provides their EU VAT number and the goods are exported within three months. You must keep proof of export.

If the customer is a consumer (B2C): You may need to register for VAT in the EU country where the goods are delivered or use the One Stop Shop (OSS) system to report EU VAT. The exact rules depend on the delivery arrangements and your total sales into the EU.

If you are not sure which applies, check the destination country’s VAT thresholds and registration rules.

Selling services outside the UK

VAT rules for services depend on where your customer belongs (where they are based) rather than where the work is carried out.

Business-to-business (B2B) sales

If you sell services to a business outside the UK, the place of supply is usually where the customer is located. This means:

You do not charge UK VAT.

The overseas business accounts for local VAT in their own country using the reverse charge mechanism.

Examples include consultancy, marketing, and IT services supplied to foreign companies.

You should record the customer’s VAT number (if they are in the EU) and evidence that they are in business, such as a company registration or website details.

Business-to-consumer (B2C) sales

If you sell services directly to non-business customers (for example, individuals), the VAT rules depend on the type of service:

For most services, the place of supply is the UK, so you must charge UK VAT.

For digital services (such as online subscriptions or apps), you may need to charge VAT based on the customer’s location under special schemes such as VAT Mini One Stop Shop (MOSS) or its post-Brexit equivalents.

If you provide services to consumers outside the UK and EU, those sales are usually outside the scope of UK VAT. You do not charge VAT, but you also cannot reclaim VAT if the costs relate solely to those services.

Example

You run a UK graphic design business and create branding for a company based in Canada. The customer is a business, so the place of supply is Canada. You do not charge VAT, but you can reclaim input VAT on your design software and UK expenses.

If you do the same work for a private individual in the UK, you must charge VAT at 20 percent.

Goods and services used both inside and outside the UK

If your business incurs costs that relate to both UK and overseas sales, you may need to apportion the VAT you reclaim. Only the portion relating to taxable (including zero-rated) supplies can be recovered.

Keeping clear records of how your goods or services are used will help you justify your calculations if HMRC reviews your VAT claims.

Documentation required for zero-rated exports

To apply the zero VAT rate correctly, you must keep evidence showing that the goods were exported. HMRC accepts several forms of proof, including:

Commercial invoices and sales contracts.

Airway bills or bills of lading.

Customs export declarations.

Proof of payment from overseas customers.

If you cannot provide sufficient evidence, HMRC may require you to charge VAT at the standard rate instead.

When to register for VAT in another country

If you sell to consumers in other countries, especially within the EU, you may need to register for VAT there once your sales exceed certain thresholds. Alternatively, you can use the One Stop Shop (OSS) to simplify VAT reporting across the EU.

For non-EU sales, check local import and tax rules, as your overseas customers may be responsible for paying import VAT in their country.

Example scenario

Sarah runs an online store in the UK selling handmade jewellery. She exports goods to customers in the USA and Germany.

Sales to the USA are zero-rated as exports, and Sarah keeps all shipping and customs documents.

Sales to German businesses are also zero-rated because they provide a valid VAT number.

Sales to German consumers are subject to German VAT because Sarah exceeds the EU distance-selling threshold, so she registers for VAT in Germany through the OSS scheme.

By applying the correct VAT treatment, Sarah remains compliant and can still reclaim input VAT on her UK expenses.

Common mistakes to avoid

Forgetting to keep export evidence when applying zero rating.

Charging VAT incorrectly on sales outside the UK.

Failing to confirm whether the customer is a business or consumer.

Ignoring local VAT registration rules for EU consumer sales.

Mixing up services and goods when applying VAT rules.

Conclusion

Whether you need to charge VAT on sales outside the UK depends on where your customers are based and what you sell. Most exports and services supplied to overseas businesses can be zero-rated, but you must meet HMRC’s conditions and keep proper evidence of export or customer status.

For complex international transactions, especially if you sell both goods and digital services, professional VAT advice is recommended. With the right records and understanding of the rules, you can ensure compliance while keeping your overseas sales as tax efficient as possible.