Exporting Goods After Brexit: VAT and Customs Considerations for Small Businesses

Years on from Brexit, exporting goods from the UK to the EU still catches small businesses out with a regularity that's a little surprising, given how much has been written about the changes since. Often it's not the big, well-publicised rules that trip people up, but the smaller practical details - the right paperwork, the correct VAT treatment, a customs declaration completed slightly wrong. Here's a practical look at what UK businesses exporting goods need to get right.

VAT on Exported Goods

Goods exported from the UK to customers outside the UK, including the EU, are generally zero-rated for VAT purposes, meaning no UK VAT is charged on the sale. This is genuinely good news for competitiveness, but it comes with a condition that's easy to overlook: you need to retain proper evidence that the goods actually left the UK, such as shipping documentation, proof of delivery, or a customs declaration, to support the zero rating if HMRC ever queries the transaction. Without that evidence, HMRC can treat the sale as though it should have been standard-rated, leaving you liable for VAT you didn't charge your customer.

Customs Declarations Are Not Optional

Every export of goods to the EU now requires a customs declaration, and while many small businesses use a freight forwarder or courier to handle this on their behalf, it's a mistake to assume the responsibility for accuracy sits entirely with them. Incorrect commodity codes, an undervalued or overvalued declaration, or missing documentation can all cause delays at the border, unexpected charges, or, in more serious cases, penalties. It's worth understanding the basics of what's being declared on your behalf, even if someone else is handling the physical paperwork.

Getting Commodity Codes Right

Every product being exported needs to be classified under the correct commodity code, which determines the duty rate applied by the importing country and affects how the shipment is treated at customs. Using an incorrect or overly generic code is one of the most common sources of delay and dispute, particularly for businesses shipping a varied product range. Taking the time to classify your products correctly, and keeping a reference record for repeat shipments, saves considerable time and reduces the risk of disputes down the line.

Who's Responsible for Import VAT and Duty

One of the areas that causes the most confusion between UK exporters and their EU customers is who's actually responsible for import VAT and any customs duty once goods arrive in the destination country. This depends on the shipping terms, commonly expressed using Incoterms, agreed between the two parties. Getting this wrong doesn't just cause an accounting headache - it can create a genuinely poor customer experience if a buyer receives an unexpected bill for import charges they weren't expecting, which is a common source of complaints and returned goods for businesses new to exporting.

Rules of Origin and Preferential Tariffs

Under the UK-EU Trade and Cooperation Agreement, goods that meet specific rules of origin criteria can benefit from preferential, often zero, tariff rates when moving between the UK and EU. However, this isn't automatic - it depends on where the goods, and importantly their components, actually originate from, and claiming preferential treatment requires proper supporting documentation. Businesses using significant non-UK or non-EU sourced components in their products are a particular area to check carefully, since assuming preferential treatment without verifying eligibility can lead to unexpected duty charges being applied retrospectively.

Registering for VAT in EU Member States

Depending on your business model - particularly if you're holding stock in an EU country, selling directly to consumers above certain thresholds, or using certain fulfilment arrangements - you may have an obligation to register for VAT in one or more EU member states separately from your UK VAT registration. This is a more involved area that depends heavily on your specific selling model, and it's worth reviewing properly with someone familiar with cross-border VAT rather than assuming your UK VAT registration covers everything.

Building a Reliable Export Process

The businesses that export smoothly tend to be the ones that have properly documented their process - correct commodity codes recorded for each product, clear agreement with customers on who bears import charges, and a reliable relationship with a freight forwarder or customs agent who understands their specific product range. If your current export process feels more like trial and error than a settled system, it's worth investing the time to get it properly documented now, before a costly delay or dispute forces the issue. We're happy to help you review where your current process might be exposed.