On 13 May 2013, HMRC published a consultation document and a draft statutory instrument on changes to the VAT rules on zero-rating exports.

Currently, supplies of goods for export outside the EU are subject to VAT at the zero rate provided they are supplied to a customer who does not have a business establishment in the UK and who is not registered for VAT in the UK.

These rules are contrary to EU law and the government, therefore, announced in the 2013 Budget that it would consult on amending the legislation. The draft statutory instrument, which is to take effect from 1 October 2013, will remove the requirement that the customer is not UK VAT registered. HMRC has confirmed that businesses are entitled to zero-rate affected supplies prior to the effective date of the amendment. In addition, businesses that have over declared VAT in respect of past supplies may submit claims for repayment.

HMRC is seeking views on whether the amendment will ensure that UK law is compatible with EU law, whether additional publicity of the amendment is required and whether the amendment will have more than a minimal impact on a small number of businesses. Responses are required by 5 July 2013.

A minor amendment will also be made to update a statutory reference in the legislation on zero-rating of goods dispatched to other EU Member States.

Click here for more information on the consultation.