Companies charge VAT on goods that normally are treated as zero-rated for VAT purpose upon sale to EU VAT customer

[Squeaky]

Hi guys

Apologies for a long post but I am trying to understand how this formula works and if people have experience on VAT treatment for dispatch of cars in EU.

This is an example how COPART UK LTD deals with dispatch of the car to another EU country for VAT registered business.

https://www.copart.co.uk/Content/UK/EN/Support/FAQ-Topics/Reclaiming-VAT

https://www.copart.co.uk/Content/UK/EN/_Forms/VAT-Information.pdf

1) According to the information provided in their VAT-information.pdf Copart automatically issues VAT inclusive invoice.

2) Customer pays full invoice price including VAT

3) All the goods purchased from Copart UK are indirectly exported outside of the UK and for that reason a deposit equivalent to the VAT amount is held by Copart UK until sufficient evidence is received from the buyer showing that the vehicles have been removed outside of the UK within the appropriate time limits.

4) EU buyer provides the following:
• EU VAT certificate
• A covering letter to include a statement declaring the goods are now at the company address and that buyer requires a VAT refund.
• A copy of the original vehicle sales invoice including VAT
• Evidence of export
• Companies bank details

5) Copart then refunds VAT to EU buyers bank account

Also COPART seems to apply zero rate VAT to any commission fees/service charges (provided the customer supplied them with valid EU VAT number) but they charge VAT at the point of sale on goods regardless if the customer is VAT registered in another EU country.

Also, there seems to be a number of dealership in UK that are using same business model when cars are sold to EU VAT registered customers.

The questions are:

1) provided Copart does not reissue amended invoice then customer is left with VAT inclusive invoice and so Copart has VAT inclusive but they must show zero VAT sale on their VAT return, how does that work?
2) what other documentation Copart issues upon VAT refund to the customer?

[Trevor S]

Although I'm not involved with the sale of cars, or the company quoted, I think I can see what's going on here...

The sale of cars to any customer in the UK, or a non-business customer elsewhere, would be subject to UK VAT. The supplier can only zero rated the supply to the foreign business customer if they have proof that the customer is in business and the goods have been exported. They won't have that proof at the time the invoice is raised, so to be safe they collect a "VAT inclusive" value. (Would be interesting to know if its a proper VAT invoice, I suspect it may not be).

If the necessary proof is provided, the supplier records the VAT exclusive value as a zero rated sale, and refunds the amount equivalent to VAT. If proof is not provided, its recorded as a standard rated sale, and the VAT paid over to HMRC. All the supplier is doing is avoiding the risk of having to meet the VAT cost themselves - which could happen if they only charged the VAT exclusive amount thinking they could zero rate, but were then unable to get the necessary proof.

Services are a bit different - there's nothing to physically dispatch/export - so no proof of export to collect. The VAT position depends on the "place of supply" - there's a whole HMRC notice on this, but the general rules applicable for most services is that for business customers the service take place where the customer is located, for other customers its where the supplier is located. UK VAT is only chargeable on services deemed to be supplied in the UK, so all the customer needs to provide to get services zero rated is their (non-UK) EU VAT registration number.