Guidance

Retail Export Scheme (Northern Ireland)

Find out when goods can be zero-rated if they’re sold to overseas visitors for personal use by a VAT-registered business in Northern Ireland (VAT Notice 704).

From:
HM Revenue & Customs
Published
31 December 2020
Last updated
20 August 2021 — See all updates

Detail

This notice applies to supplies made by retailers in Northern Ireland to visitors from outside both Northern Ireland and the EU.

Special rules in section 6 apply for goods removed to Great Britain (England, Scotland and Wales).

1. Overview

1.1 Information in this notice

This notice explains when supplies of goods sold by VAT-registered retailers in Northern Ireland to overseas visitors for personal use and exported as accompanied baggage can be zero-rated. In particular, it sets out the conditions that must be complied with by retailers and overseas visitors using the VAT Retail Export Scheme.

1.2 The changes in this notice

This notice has been updated to at section 6 to clarify the treatment of goods moving from Northern Ireland to Great Britain.

1.3 Who should read this notice

You should read this notice if you are a VAT registered business in Northern Ireland and you intend to sell goods to visitors from outside Northern Ireland and the EU.

Special rules in section 6 apply for goods removed to Great Britain.

1.4 The law

Article 147 of the Principle VAT Directive requires EU member states to provide for a RES. The Northern Ireland Protocol means the scheme is available in Northern Ireland too.

Article 131 requires conditions to be made to ensure the correct and straightforward application of the scheme and to prevent possible abuse of the scheme.

The principal UK law relating to RES can be found in:

  • Schedule 9ZA of VAT Act 1994
  • Regulation 133C of the VAT Regulations (Statutory Instrument 1995/2518)

1.5 The status of this notice

Under UK VAT law, HMRC may specify conditions to prevent evasion, avoidance or abuse. This notice lays down the conditions, which must be met in full, for the scheme to apply.

Section 9  contains conditions that have force of law. 

1.6 General definitions used in this notice

For the purposes of the scheme the following definitions are used:

Retailer: The primary seller of the goods that the overseas visitor wishes to take home with them.

Refund provider: A third party company that enters the supply chain between the retailer and the overseas visitor under the Direct Refund Scheme, or through the Disclosed Agency Model (Section 4). The refund provider becomes the de-facto retailer to the overseas visitor and the company entitled to zero-rate the supply.

RES retailer: the business making the supply to the overseas visitor and thus the person entitled to zero-rate the supply. In most cases that will either be the Retailer or the Refund provider (as above).

1.7 Where to get more information if you’re a traveller

Retailers and travellers may get more information and advice from the VAT: general enquiries helpline.

A simplified notice aimed specifically at travellers, Claim VAT back on tax-free shopping in the UK (VAT Notice 704/1) highlights the main aspects of the scheme.

Tourist and travel organisations as well as the VAT refund companies distribute information about the VAT Retail Export Scheme.

2. General principles

2.1 The VAT Retail Export Scheme

The VAT Retail Export Scheme allows RES retailers to zero-rate goods sold to certain customers (overseas visitors) (paragraph 2.5) subject to conditions detailed in paragraph 2.3 .

This is a voluntary scheme and retailers do not have to operate it. Those who do must make sure that all the conditions set out in this notice are met.

2.2 Minimum sales value

The scheme has no minimum sales value, although retailers may set a minimum sales value below which they will not operate the scheme.

2.3 Conditions of the scheme

RES retailers may only operate the scheme when they comply with the conditions set out in this notice. These include the:

  • customer must be entitled to use the scheme (see paragraph 2.5)
  • goods must be eligible to be purchased under the scheme (see paragraph 2.7)
  • customer must make the purchase in person and complete the form in full
  • customer must be at the retailer’s premises
  • goods must be exported from Northern Ireland and the EU by the last day of the third month following the month in which the goods were purchased (see paragraph 2.4)
  • customer must send either the retailer or the refund company evidence of export stamped by customs on an official version of form VAT 407, an approved version of form VAT 407 or an officially approved invoice (see paragraph 3.3)
  • customer must attach evidence of their destination (see paragraph 6.4)
  • supply must not be zero-rated until the VAT has been refunded to the customer (see paragraph 3.6)

2.4 Time limit for export

The goods must be exported from Northern Ireland and the EU by the last day of the third month following the month in which the goods were purchased. The time limit for export cannot be extended.

RES retailers must not zero-rate goods exported after the last day of the third month following the month in which the goods were purchased - even if the VAT refund document has been stamped in error by a Border Force or EU Customs Officer.

2.5 Who can buy goods under the scheme

2.5.1 Overseas visitors

An overseas visitor is a traveller (including a member of the crew of a ship or aircraft) who is not established in Northern Ireland or the EU.

This means a person whose domicile or habitual place of residence is not situated within Northern Ireland or the EU. A person’s ‘domicile or habitual residence’ is the place entered as such on their valid passport, identity card or other acceptable document, such as a driving licence. The customer must prove their eligibility to use the scheme by providing one or more of these documents

The scheme is only open to eligible visitors who:

  • intend to leave Northern Ireland or the EU, with the goods, by the last day of the third month following the month in which the goods were purchased (for example, goods purchased on 1 June must be exported by 30 September)
  • export the goods having produced them, their receipts, and the VAT refund document to a Border Force or EU Customs Officer at the point of departure from Northern Ireland and the EU

If a visitor is established in Northern Ireland or the EU, they are not an overseas visitor for the purposes of this scheme and are not normally entitled to receive a refund under this scheme. See paragraph 2.5.3 for entitled Northern Ireland and EU residents.

2.5.2 Overseas visitors who study or work in Northern Ireland

Overseas visitors who are students or migrant workers are only entitled to purchase goods under the scheme during the last 4 months of their stay.

2.5.3 Entitled Northern Ireland and EU residents

For the purposes of this scheme only, a customer who is established in Northern Ireland or the EU but intends to permanently leave for a minimum period of 12 months may also be treated as an overseas visitor. To qualify under this provision, the customer must:

  • intend to leave with the goods by the last day of the third month following the month in which the goods were purchased
  • remain outside Northern Ireland and the EU for a period of at least 12 months, the customer must prove their eligibility to use the scheme by providing evidence of their intention to remain outside Northern Ireland and the EU for at least 12 months, typically this evidence would be one of the following:
    • overseas work permit
    • approved visa application
    • residency permit

2.6 Countries in the EU

The VAT territory of the EU is made up of 27 member states. Details of the EU VAT territory are available on the EU website.

2.7 Goods that can be sold under the scheme

Legal conditions are set out in paragraph 9.1

Standard-rated goods and lower-rated goods with the exception of those listed may be sold under the scheme:

Zero-rated goods such as books and children’s clothing cannot be sold under the scheme.

2.8 Exclude certain goods from the scheme

Retailers can exclude certain goods if they wish. They do not have to operate the scheme for all lines of goods that they sell or at every retail outlet.

2.9 Sales by mail order or goods sold over the internet

Mail order companies or internet retailers with a retail outlet “click-and-collect” can use the scheme provided they comply with all the conditions set out in this notice at the time of collection.

The scheme cannot be used for goods sold by mail order or over the internet and delivered to the overseas visitor in Northern Ireland unless entitlement to use the scheme can be verified digitally (see paragraph 3.1.2).

2.10 Services

The scheme cannot be used for services supplied to customers such as hotel accommodation, meals and car hire. The scheme is only available for the sale of goods.

This applies even where services are sold with the goods, for example warranties. However, services incidental to the supply of goods, e.g. engraving on jewellery, made before the goods are purchased will normally be seen as part of the single supply of the goods even if separately itemised.

Where spare parts are supplied as part of a repair service (for example repairing a camera) any parts will be eligible for inclusion in the scheme.

2.11 Charging for administrative or handling expenses

Legal conditions are set out in section 9.2.

RES retailers often make a charge for administering or handling the refund. This is a supply of administration services and the fee is normally deducted from the repayment due. Where the administration services are contracted out to a third party see paragraph 4.3.

This is not part of the HMRC scheme and is a commercial matter between the RES retailer and the overseas visitor.

You are strongly advised to explain this charge clearly to the overseas visitor when they buy the goods to avoid subsequent confusion or misunderstanding. It is a condition of the scheme that if you or your refund agent intend to deduct any amount from the refund due, the amount must be disclosed and shown clearly on the VAT refund document.

Charges that are optional, such as fees charged by a cash refund company, or for fast-tracking are not covered by this condition.

2.12 Goods exported as freight

The scheme cannot be used for goods exported as freight (including unaccompanied baggage, courier and post). The procedures for exporting goods by freight are described in Goods exported from the UK (VAT Notice 703).

3. Making a sale under the VAT Retail Export Scheme

The process consists of a number of steps, including:

  • eligibility of the overseas visitor to use the scheme is established
  • purchases are made and a VAT 407 form is fully completed
  • overseas visitor has the VAT 407 stamped/endorsed by Customs when leaving Northern Ireland or the EU
  • VAT 407 is returned to the retailer, refund provider or refund agent, with evidence of destination
  • refund to the overseas visitor is made
  • supply is zero-rated in the records

Each step is explained below.

3.1 Eligibility of the overseas visitor

3.1.1 Basic requirements

Prior to making a scheme purchase, the retailer must be satisfied that their customer is an overseas visitor. This should be done at the time of the purchase transaction and is generally done face-to-face at the retailer’s premises. However, digital verification may be permitted, see paragraph 3.1.2.

You must ask to see evidence that the customer is an overseas visitor and they should sign the declaration on the VAT 407 form to confirm compliance.

You can collect the overseas visitor’s data electronically and print a completed VAT 407 form for them.

3.1.2 Digital verification

The eligibility of an overseas visitor may be established through means similar to the “Customer due diligence requirements’’ used by financial institutions under the Money Laundering Regulations. That is, the overseas visitor provides their personal details (as set out on the VAT 407 form) together with a copy of their ID documentation, through a digital portal. Once these details are verified, a unique verification reference (UVR) can be issued, preferably of an Optical Charter Reader (OCR) type such as a QR code.

Such a verification service may be provided in-house or by third parties to the RES retailer. Verification service providers may pre-authenticate overseas visitors directly and provide them with a UVR.

Retailers can accept UVRs into their sales system and automatically populate the relevant parts of the VAT 407. The retailer remains responsible for the eligibility test and is recommended to undertake due-diligence for any providers of UVRs they accept.

3.2 Completion of a VAT 407 form

Legal conditions are set out in paragraph 9.3.

For the purposes of the scheme references to a VAT 407 refund document is to the HMRC paper form, an equivalent “own version” paper form or an electronically held equivalent (whether printed or not).

When you make a sale under the scheme to an overseas visitor you must complete a VAT 407 refund document. In the case of an electronically held VAT 407 the transaction should be recorded at the time it takes place.

You should take care to ensure that all the required information is captured and is legible. Forms that are illegible may not be acceptable as evidence for zero-rating even if they are stamped or endorsed by customs.

When a customer purchases goods under the scheme, you should record them separately on the VAT 407. Multiple purchases of the same item need not be on a separate line as long as the quantity is shown. Where the overseas visitor will be charged an administration fee you must disclosed that at the time of sale.

Where a digital VAT 407 process is used a RES retailer may consolidate other purchases made by the same overseas visitor. This is more likely to be used by refund providers working with multiple retailers.

Such a VAT 407 must be dated no later than the last day of the month in which the goods were purchased and only purchases made within that month can be included on that VAT 407.

Only when the overseas visitor is leaving Northern Ireland and the EU will the VAT 407 be needed by them. However, you must make VAT 407s available when requested by an overseas visitor.

While a single refund document is preferred, if the overseas visitor intends to carry some of the goods in hand baggage and others in hold baggage separate forms may be needed. This is particularly important if the customer is leaving on a through (transit) flight via another airport because the goods in hold baggage must be declared before check in, whilst the goods in hand baggage must be declared at the final point of departure from Northern Ireland and the EU.

3.3 Proof of purchase: invoice or receipt

Legal conditions are set out in section 9.4.

In addition to the VAT 407 retailers will normally issue an invoice, till receipt or other proof of purchase at the time of sale. These must be endorsed or coded to show they were issued in connection with a claim. The endorsement, e.g. stamping or printing “Tax Free Sale” on it, or encoding such that a till system will recognise the sale as such. This is to ensure that if the goods are returned the VAT 407 is cancelled.

3.4 Customs stamp/endorsement

All VAT 407 forms need to be endorsed by a Customs Officer at the point of exiting Northern Ireland or the EU. Normally this is done by stamping each form individually.

Where the VAT 407 is held electronically the data file must be available to the overseas visitor for printing (for example, as a pdf file).

Any printed document should be laid out in a similar format as the HMRC VAT 407.

In Northern Ireland the arrangements for collecting, endorsing and returning VAT 407 forms may vary from exit to exit.

3.5 Returning the VAT 407 form

Once the VAT 407 has been stamped or endorsed by a Customs Officer it needs to be returned to the retailer or their agent.

Border Force may have arrangements with refund providers to return stamped forms to a central point for onward redistribution. Where such arrangements are not in place the VAT 407 will either be given back to the overseas visitor or forwarded in a stamped addressed envelope provided by the overseas visitor. Border Force are not responsible for ensuring the safe return of the VAT 407 to the retailer.

Overseas visitors who leave from an EU member state will have their forms stamped by Customs Officers in those states who should return them in the same way. HMRC and Border Force are not responsible for handling these forms.

Forms stamped outside Northern Ireland and the EU cannot be accepted as valid under the scheme.

3.6 Refund to the overseas visitor

Legal conditions are set out in paragraph 9.5.

When you receive a VAT refund document stamped by Border Force or other EU customs, check that all goods have been exported from the EU by the last day of the third month following the month in which the goods were purchased. Unendorsed VAT 407s or VAT 407s endorsed outside of the EU are not to be accepted as evidence of export under any circumstances.

Once you are satisfied, you should make any refund due to your customer by the method agreed at the time of sale. It is a requirement of the scheme that the overseas visitor is given a full refund of the VAT on the supply.

How that refund is made and in what currency is a matter to be agreed between the retailer and the overseas visitor. Where the exchange rate applied to the refund is significantly different from the normal tourist exchange rates that should be disclosed to the overseas visitor in any terms and conditions or prior to the original sale being completed.

If there is an administration charge this is for a separate supply of services to the overseas visitor. Any payment for that administration can be off-set against the amount to be refunded if agreed with the overseas visitor. Administration fees are covered in paragraph 2.11.

3.7 Evidence of destination

Legal conditions are set out in paragraph 9.6.

To account correctly for the the claim, RES retailers will need to know whether the overseas visitor intends to remove the goods from Northern Ireland to Great Britain (see section 6). To do that, the RES retailer needs to hold evidence of the overseas visitor’s destination on departure from Northern Ireland or the EU.

If the overseas visitor is not travelling directly to Great Britain (see paragraph 6.1.1), they need to provide evidence of that to the RES retailer. The evidence should be attached to the VAT 407 claim form which Border Force will forward to the RES retailer along with the form. Evidence, for example, might be copies of travel documents.

Overseas visitors leaving Northern Ireland or the EU on a connecting flight via a Great Britain hub will be considered to be removing the goods directly to their home destination as long as the passenger and the goods do not pass through customs in Great Britain.

3.8 Zero-rating the supply

RES retailers must account for the VAT on the supply to the overseas visitor at the time of the supply. Only once notification of the endorsement of the VAT 407 and evidence of destination is received by them and the refund made can the VAT on the supply be adjusted.

Where a retailer supplies the goods “VAT free” this simply represents a discount on the supply and VAT still needs to be brought to account on that discounted value and later adjusted under the scheme rules.

Overseas visitors may receive a cash advance of the VAT to be refunded; often by a third party specialist. Any cash advance is not the VAT refund and is at the risk of the business making the advance. It does not alter the VAT accounting under the scheme. Paragraph 4.4 gives further details.

4. Agency arrangements

There are 2 models HMRC are aware of where third-party companies become intermediaries in the supply of goods from the retailer to the overseas visitors. These are described below as the Direct Reclaim Scheme (DRS) and the Disclosed Agency Model (DAM). These are not HMRC approved schemes but represent a series of normal transactions facilitated under contract law. Operators of such models are responsible for ensuring they are compliant with VAT and consumer Law.

The guidance below explains how HMRC understand the methods of operation and the points that the businesses involved need to be aware of.

4.1 Direct Reclaim System (DRS)

The system works as follows:

  1. The retailer sells goods to the refund provider who then sells those goods to the overseas visitor.
  2. The refund provider effectively becomes the retailer of the goods (the RES retailer) and is entitled to claim the zero-rate relief.
  3. The retailer must issue a tax invoice to the RES retailer, as this is a business-to-business sale; not a retail sale.
  4. The retailer completes the sale to the overseas visitor on behalf of the RES retailer (as a selling agent of that entity), under contractual arrangements that state the duties and responsibilities of each party.
  5. The retailer checks the overseas visitor’s details and completes the VAT 407 as agents of the refund company (now the RES retailer).

The RES retailer is, through this arrangement, the person who must follow the guidance in this notice.

4.2 Disclosed Agency Model (DAM)

The model works as follows:

  1. The overseas visitor, prior to making any purchases from a retailer, enters into a contract with a refund provider to act as an “authorised representative” or purchasing agent of the refund provider.
  2. The overseas visitor purchases the goods from a retailer, disclosing the identity of the refund provider.
  3. This creates a business to business sale directly from the retailer to the refund company facilitated by the overseas visitor. The retailer will be required to issue a tax invoice to the refund company.
  4. At the same time, the overseas visitor enters into a sales agreement, with themself, as a selling agent of the refund provider, to purchase the same goods for the same price from them.
  5. By that action the refund provider becomes the RES retailer.

The RES retailer is through this arrangement the person who must follow the guidance in this notice. This includes the special rules for sales to visitors travelling to Great Britain.

4.3 Invoicing and agents

Under both the DRS and the DAM processes the refund agent becomes the de-facto RES retailer and must account for the VAT on the sale by them to the overseas visitor. The conditions of this Notice apply accordingly.

4.3.1 Direct Reclaim System

The DRS provides that there is a business to business supply of the goods prior to the VAT Retail Export Scheme supply by the refund provider to the overseas visitor. The retailer is making 2 supplies, the supply of the goods to the refund provider and an agency supply of arranging the supply by the refund provider to the overseas visitor.

Retailers are therefore required to issue tax invoices to the refund provider following the normal invoicing rules (including electronic invoicing).

The VAT 407 may double as that invoice if it contains the information required by the invoicing rules.

4.3.2 Disclosed Agency Model

The DAM provides that the supply by the retailer is to the refund provider. This requires the overseas visitor as the agent of the refund provider to disclose the identity of the DAM provider to the retailer when making the initial purchase. This creates a business to business supply by the retailer to the refund company and a tax invoice must be issued. In order to prevent possible abuse of the refund scheme the invoice held by the refund provider should be in the name of the refund provider.

The overseas visitor then acting as selling agent arranges the supply by the refund company to themselves.

4.4 Refund Agent

Refund agents do not take part in the supply of the goods, they just supply services of administering the scheme on behalf of client retailers.

Service can include some or all of the following:

  • providing paperwork
  • computer software and hardware at the retailer’s point of sale
  • providing ID verification
  • processing the refunds
  • making the refund payments to the overseas visitor

Normally these services will be supplied to the retailer. If the payment for the services is recharged to the overseas visitor the guidance in paragraph 2.11 should be followed.

In some instances, the agent may make administration supplies directly to the overseas visitor, for example under the Disclosed Agency Model. The same principles should be followed.

The special rules for visitors travelling to Great Britain will need to be followed where appropriate.

4.5 Cash refunder

At some airports and also in some high-street locations, overseas visitors may be able to get a “refund” of the VAT from a cash refunder prior to them lodging the VAT 407 claim and departing from Northern Ireland and the EU.

It is important to note that any such cash payment is to be treated as a cash advance made at the risk of the cash refunder. Until all the conditions of the scheme are met there is no VAT refunded. Cash refunders are strongly advised to make sure the overseas visitor is aware that they still must still lodge the claim when they depart from Northern Ireland and the EU.

In order to make this work the cash refunders will have agreements with RES retailers or others involved in the supply of VAT Retail Export Scheme goods to recoup the cash paid out to the overseas visitors.

The cash refunders will generally generate income from a discrete charge to the overseas visitor, through foreign exchange rates or by charging the RES retailer a fee.

Provided that the use of cash refunders is optional on the part of the overseas visitor there is no need to disclose any charges on the VAT 407 at the time of sale.

The special rules for visitors travelling to Great Britain will need to be followed where appropriate.

4.6 Treatment of admin charges

If you deduct an amount from the VAT refund due to cover administrative or handling expenses, the amount you deduct is a consideration for the supply of the service in connection with the export of goods to a destination outside the EU, and is zero-rated.

5. Completion and control of refund forms

When you make a sale under the scheme to an eligible overseas visitor going to a final destination outside the EU you must complete a claim form or capture the claim data to an electronic system.

Whatever form the claim is formatted in the same information must be captured.

HMRC publish and make available a standard form VAT 407. These forms will only be issued directly to retailers and should be kept secure and must not be handed over to an overseas visitor incomplete.

5.1 Form VAT 407

Legal conditions are set out in paragraph 9.7.

If you use form VAT 407 the following versions can be used:

  • form VAT 407 issued by HMRC, available free of charge from the VAT: general enquiries helpline
  • your own version of the form VAT 407
  • a refund company’s branded version of the form VAT 407

All other versions of the forms must:

  • collect the same information and as the official VAT 407
  • closely follow the design of the HMRC version of form VAT 407
  • not contain additional conditions to the official form other than is necessary to reflect the contractual arrangement

5.2 How to complete form VAT 407

When completing a form VAT 407 the following instructions must be followed.

5.2.1 How to complete form VAT 407

If you have the necessary printing equipment you may arrange for the information to be printed directly onto the form. You must ensure that any printing sits within the correct box.

Part Completed by Procedure
A Customer Make sure your customer completes this part legibly in full at the time of sale and signs the declaration.
B Retailer (a) Give a full and accurate description of the goods quoting identification numbers, serial numbers or other identifying marks for example hallmarks, together with the quantity (and weight in the case of jewellery) of goods sold. Descriptions such as stock numbers, ‘see invoice attached’, ‘Jewellery’ or ‘Designer goods’ are not acceptable. The description must be clear enough to allow the Customs Officer to readily identify the goods. For example, ladies size 14, long sleeved black maxi dress.
(b) Cross through any unused lines on the form.
(c) Show the total amount payable including VAT in both words and figures, the amount of VAT included in the price, the amount of any administration fee that will be deducted from the refund and the amount of refund that will be paid to the customer.
C Retailer (a) Insert the full name of your business, address and VAT number.
(b) Insert the date the goods were sold to the customer.
(c) The declaration must be signed either by a responsible person in your business.
D Customs Officer At the point of departure from Northern Ireland and the EU a Customs Officer will stamp the form to validate the export.

Customs Officers may refuse to stamp refund forms completed incorrectly or not completed in full. For example, forms showing inadequate descriptions of goods may be rejected.

5.2.2 Your own version of the form VAT 407

Legal conditions are set out in paragraph 9.8.

This part refers to retailers using their own versions of VAT 407s and those issued by retailers as agents of a refund provider.

If the information is captured electronically for later printing this part applies to the content of the printed form.

VAT 407s must be issued in the name of the RES retailer that is making the supply under this scheme. If a retailer is using VAT 407s branded in the name of a refund agent it must be clear on the form who is making the VAT Retail Export Scheme supply.

Where a retailer is issuing a VAT 407 as agent of a refund provider it must be clear on the form who is making the VAT Retail Export Scheme supply.

5.3 Complete the VAT refund form for past purchases

Legal conditions are set out in paragraph 9.3.

VAT refund claim forms must normally be completed at the time of sale. Customers may ask you to complete a refund form to cover past purchases. You may only agree to such requests if you have adequate security procedures in place to prevent abuse of the scheme. Particular care should be taken where the request is made at a different branch or location to the original purchase.

Any late issued VAT 407 forms should be dated no later than the last day of the month in which the goods were purchased and only purchases made within that month can be included on that VAT 407.

5.4 Lost refund documents

5.4.1 Document lost before certification

If your customer has lost the VAT refund document before leaving Northern Ireland and the EU and asks for another, you can prepare a ‘duplicate’ clearly marked as such. The duplicate form and the goods must be produced to the Border Force or EU Customs Officer at the point of departure from Northern Ireland and the EU. You should take steps to ensure that should the original document appear it is not processed through your records.

When issuing a duplicate document, you must:

  • make sure the original document has not been received and processed by you already
  • be satisfied that a sale took place by the production of till receipts or other information
  • advise the overseas visitor if they find the original refund document later, it is to be cancelled

If you later receive the original document, ensure it is cancelled.

5.4.2 Document lost after certification

If your customer has lost the VAT refund document after stamping by a Border Force officer, you may issue a duplicate only where a photocopy of the stamped original is produced. Duplicates of forms lost after Border Force stamping must not be issued in any other circumstances.

The duplicate and the photocopy of the original document stamped by Border Force must be sent to the Border Force officer who stamped the original document. If satisfied, the Border Force officer will stamp the duplicate and return it to you so that a refund may be made.

5.5 Returned goods

Where goods sold under the scheme are returned to a retailer for refund, for whatever reason, you should take steps to ensure that the claim is cancelled. If you have an arrangement with a refund provider and/or refund agent you must inform them of the return so they can cancel the VAT 407 claim. Particular care should be taken where the return is made at a different branch or location to the original purchase.

5.6 Uncertified export documents

The scheme requirements are for the form to be stamped or endorsed by a Customs office on final exit from Northern Ireland and the EU.

If your customers send you VAT refund documents which have not been stamped by a Border Force or other EU Customs Officer, you cannot zero-rate the supply because export of the goods has not been certified as required by the scheme.

5.7 Goods not exported

Customers sometimes decide not to export goods purchased under the scheme. When customers present a VAT refund claim to Border Force or other EU customs, they’re making a declaration that all the goods shown in the claim are being exported from the EU.

You should inform your customer that any goods listed in the VAT refund claim and not exported from Northern Ireland and the EU must be deleted from the claim before it’s presented to a Customs Officer for stamping.

It is a customs offence to make a false declaration.

Where the claim data is held electronically you will need to provide facilities for the overseas visitor to remove any items that will no longer be subject to the claim.

Goods for consumption in Northern Ireland and the EU - no certification of export will be given for used consumable items, for example, perfume which is wholly or partly consumed in the EU.

6. Overseas visitors removing goods to Great Britain

6.1 Direct and indirect movements

6.1.1 Direct movement

Direct movements are:

  • travelling direct from Northern Ireland to Great Britain,
  • travelling via the EU, including the Republic of Ireland — for example, travelling from Northern Ireland to France and from France to Great Britain, or from Northern Ireland to Dublin, and from Dublin to Great Britain

The overseas visitor should have their VAT 407 stamped by a Customs Officer at the point they leave either Northern Ireland or the EU, whichever is the last point of exit before arrival in Great Britain.

6.1.2 Indirect movements

An indirect movement is where the overseas visitor travels from Northern Ireland to Great Britain via a non-EU country, for example, from Northern Ireland to Switzerland and from Switzerland to Great Britain.

If travelling via a non-EU country the overseas visitor should have their VAT 407 stamped by a UK Customs Officer when they leave Northern Ireland.

If an overseas visitor travels from Northern Ireland to Great Britain via an EU country and then a non-EU country, then the overseas visitor should have their VAT 407 stamped by the EU Customs Officer when they leave the EU. For example, if travelling from Northern Ireland to France, then to Switzerland and then departing Switzerland to Great Britain, form VAT 407 should be stamped when leaving France.

6.2 UK internal market

VAT Retail Export Scheme can, in principle, be used for purchases by all overseas visitors who are departing directly or indirectly to Great Britain.

However, UK consumers should pay the same amount of VAT wherever they buy goods in the UK and whether they use VAT Retail Export Scheme or not. Slightly different rules will apply for goods moved indirectly to Great Britain.

6.3 VAT Retail Export Scheme claims

6.3.1 Direct movement

The VAT 407 will need to be stamped by Border Force on leaving Northern Ireland or the EU, see paragraphs 3.4 and 6.1.1.

There are no personal allowances for goods imported into Great Britain from Northern Ireland via a direct movement so on arrival in Great Britain, import VAT is due on the goods if VAT Retail Export Scheme has been claimed.

This applies to all VAT Retail Export Scheme claims for goods arriving into Great Britain via a direct movement, regardless of whether the overseas visitor is a UK resident or resident of a non-EU country.

Overseas visitors can choose not to lodge the form with Border Force and the claim will lapse with no further implications on either the retailer or the overseas visitor. An overseas visitor who has not lodged the claim may return to Northern Ireland or the EU and lodge the claim when they leave from there at a later date, subject to meeting the normal conditions.

6.3.2 Indirect movement

The VAT 407 will need to be stamped by a Northern Ireland Customs Officer on leaving Northern Ireland, or an EU Customs Officer on leaving the EU, see paragraphs 3.4 and 6.1.2. However, on arrival in Great Britain, the overseas visitor will then be liable for import VAT on the goods if they exceed their personal allowance. If they exceed their personal allowance they will need to make a declaration and pay any tax and duty due.

6.4 Accounting for UK import VAT

6.4.1 Direct movement

If the overseas visitor has made a VAT Retail Export Scheme purchase in Northern Ireland, they will not be required to make any declaration on arrival into Great Britain themselves. Instead the RES retailer, on receipt of the stamped VAT 407, must account for the overseas visitor’s import VAT in their VAT account before they refund the VAT under the terms of the scheme.

The VAT refund and the import VAT due should be the same amount and will net off to £0. For this reason retailers may decide not to offer VAT Retail Export Scheme to overseas visitors that are intending to leave Northern Ireland directly for Great Britain while continuing to offer it to other overseas visitors.

6.4.2 Indirect movement

Passengers entering Great Britain are required to make a declaration if they have goods that exceed their personal allowances. When calculating the value of their goods, they must include any goods purchased under the VAT Retail Export Scheme scheme in Northern Ireland.

On receipt of the validated VAT 407 claim form, and evidence of destination, retailers should make a refund to the overseas visitor, see paragraphs 3.6 and 3.7.

6.5 Records

The RES retailer must retain:

  • the endorsed VAT 407
  • the evidence of destination

This ensures that the correct amount of VAT is paid on the goods and there is consistency across the UK.

7. Other information

7.1 Advice to overseas visitors

At the time of the sale you should:

  • agree with your customer how the refund will be made
  • explain about any administrative fees
  • mark your customer’s sales receipt to indicate that the goods have been included on a VAT refund document, for example, ‘VAT export’
  • explain that no refunds will be made on items (such as perfume) wholly or partly consumed in Northern Ireland or the EU
  • advise them to produce their refund document to the Customs Officer for stamping at the point of departure from Northern Ireland or the EU, explain that failure to do so will mean that a refund will not be paid, the goods and receipts must also be available for inspection if required
  • explain the need to provide evidence of journey out of Northern Ireland
  • explain what happens if they remove the goods to Great Britain
  • explain to passengers making a direct journey to Great Britain that they will not receive a refund because the retailer must account for import VAT
  • explain that passengers making indirect journey that they must include their VAT Retail Export Scheme purchases in the total value of their goods, and need to make a declaration if the exceed their personal allowances
  • explain when they are required to provide evidence of destination
  • advise them that different rules may apply for checked and hand baggage
  • advise them to allow plenty of time in which to produce their goods and refund form prior to departure, this is particularly important if they’re exporting goods in hold baggage as they may need to allow addition time in case of queues
  • advise them to carry items of high value, for example, jewellery, furs, cameras, watches, silverware, laptop computers and small antiques in their hand baggage
  • you may also wish to advise your customer to take a copy of the VAT refund document once it has been stamped by customs

7.2 Export licensing

Antiques and cultural goods may be exported only on production of a valid export licence to customs at the point of departure from the UK. Further advice can be obtained from the Department for Digital, Culture, Media & Sport.

If you sell goods that fall into this category you should explain this to your customers. They may need your assistance to get an export licence.

8. Special schemes

8.1 Retailer schemes

8.1.1 Retailers who use a retail scheme

The individual retail schemes notices (in the 727 series) will explain how you should deal with sales and refunds under the VAT Retail Export Scheme in your retail scheme calculations.

8.1.2 Retailers who do not use a retail scheme

You must keep a record of all sales including VAT made under the VAT Retail Export Scheme Once the conditions are met and you have refunded the VAT, you can zero-rate the sale in your records by adjusting your VAT account.

8.2 Concession shops

Many larger stores operate concessions for other retailers within their own stores, where one counter or area sells goods from another retailer’s range. Where the sale is rung through the main store tills it’s acceptable for the VAT refund document to be issued by the host store (typically at the main customer service desk). In these circumstances the host store is responsible for complying with the conditions of the scheme as set out in this notice and for accounting for the VAT.

However, where the concession operates its own tills and issues receipts in its own right showing its own name and VAT number, any VAT refund documents relating to these purchases must be issued by the concession and not the host store. In these cases the concession is responsible for complying with the conditions of the scheme as set out in this notice and for accounting for the VAT.

8.3 Sales under the Margin Scheme for second-hand goods, works of art, antiques and collectors items

If you make sales under the Margin Scheme for second-hand goods, accounting requirements will differ from those that must be fulfilled under the VAT Retail Export Scheme. You can use the 2 schemes for a single sale if you adapt the VAT refund document as follows:

  • head it ‘Second-hand goods - this document is adapted in accordance with Notice 704, paragraph 8.3’
  • leave the line ‘Amount of VAT included in the price’ blank
  • complete the refund due box

The VAT refunded will be due under the margin scheme. See VAT Notice 718: the margin and global accounting scheme (VAT Notice 718).

8.4 Sales by auctioneers

If an auctioneer sells goods on your behalf to someone who is entitled to use the Retail Export Scheme (RES) and a VAT refund document is completed, you can zero-rate the sale when:

  • the VAT refund document stamped by a Border Force officer is returned to you
  • you have made the refund to your customer

If auctioneers are registered for VAT and sell goods in their own name to someone who is entitled to use the scheme then, for VAT purposes, they may be treated as both receiving and making a supply of goods in accordance with the VAT guide (VAT Notice 700). They can zero-rate the sale as a RES retailer provided they fulfil the conditions of the scheme.

9. Conditions having force of law

The conditions in this section have force of law.

9.1 Goods that cannot be sold under the scheme

Goods that cannot be sold under the scheme include:

  • goods that are already zero-rated such as books and children’s clothing
  • goods that are being exported for commercial purposes and which require an export declaration
  • goods that require an export licence
  • motor vehicles for personal export
  • boats intended to sail away as a personal export
  • unmounted gemstones
  • bullion (over 125 grammes, 2.75 troy ounces or 10 Tolas)

9.2 Administration charges

If you or your refund agent intend to deduct an amount from the VAT refund to cover, for example, administration of the refund, then the amount must be disclosed to the overseas visitor and clearly written on the VAT 407 form in the box provided, at the time of sale.

9.3 Completion of the VAT 407 form

The VAT 407 form must be completed in full or an electronic record of the sale made on account of the overseas visitor at the time of sale.

A VAT 407 should be dated no later than the last day of the month in which the purchases were made and only purchases made within that month can be included on that VAT 407.

9.4 Proof of purchase: invoice or receipt

Invoices or receipts issued together with a VAT 407 form must be endorsed or coded to show they were issued in connection with a VAT Retail Export Scheme claim and to ensure the VAT 407 is cancelled if the goods are returned.

9.5 Refund to the overseas visitor

It is a condition of the scheme that the VAT refund is made in full to the overseas visitor. You cannot zero-rate the supply until the refund has been made.

9.6 Evidence of destination

RES retailers must hold evidence of the overseas visitor’s immediate destination at the time they presented the form for stamping at a customs office on leaving Northern Ireland and the EU.

9.7 VAT 407 form

The VAT 407 form means the form published by HMRC and any equivalent form that meets the conditions of paragraph 9.4. An equivalent form includes one that is printed from stored electronic data.

You do not need to seek HMRC approval of equivalent versions of form VAT 407.

9.8 VAT 407 own version conditions

The VAT 407 or invoice must closely follow the design of the HMRC version of form VAT 407.

It must include the information shown on the reverse side of the HMRC version of form VAT 407. This includes:

  • the heading ‘Retail export scheme’
  • details of the customer’s passport or identity number and country of issue, date of arrival into Northern Ireland and the EU, customers destination and intended date of departure from Northern Ireland and the EU
  • a record the sales information
  • a record of the values, including any administration fees
  • providing spaces for the retailer’s and the customer’s declarations
  • a separate box not less than 5 centimetres by 3.5 centimetres for official stamping by a Customs Officer at the customer’s point of departure from Northern Ireland and the EU
  • the total amount refundable must be shown in words as well as figures

The overseas form may also include conditions that govern consumer law.

The visitor must not be subject to conditions that are unnecessary for the smooth operation of the scheme, such as marketing.

Your rights and obligations

Read Your Charter to find out what you can expect from HMRC and what we expect from you.

Help us improve this notice

If you have any feedback about this notice email: [email protected].

You’ll need to include the full title of this notice. Do not include any personal or financial information like your VAT number.

If you need general help with this notice or have another VAT question you should phone our VAT helpline or make a VAT enquiry online.

Putting things right

If you are unhappy with HMRC’s service, contact the person or office you’ve been dealing with and they’ll try to put things right.

If you are still unhappy, find out how to complain to HMRC.

How HMRC uses your information

Find out how HMRC uses the information we hold about you.

Updates to this page

Published 31 December 2020
Last updated 20 August 2021 + show all updates

  1. This notice has been updated at section 6 to clarify the treatment of goods moving from Northern Ireland to Great Britain.

  2. First published.

Sign up for emails or print this page

Contents

Related content