We run a small ltd company and are selling some small machinery parts to a sister company of BP in Algeria. As far as I am aware we don't charge VAT when we sell them the goods but what about when we buy the goods we are goings sell to them. I.e we will buy the part for £100 + £20 VAT....do we pay the VAT, claim it back, or are we exempt from paying it in the first place as we are buying to export? Any help on this would be great.
That really helps, thanks three....We are buying most if the goods from the UK but some are coming from USA so I'm assuming we pay import tax from USA to UK then pass the details over to the freight forwarders who will be dealing with the export from UK to Algeria?
If the US goods are physically coming into the UK, you'll have UK import VAT and duties to pay - but there are reliefs available for imports that you plan to re-export, such as 'temporary admissions' relief, or warehousing. Any import VAT should be reclaimable on VAT return (you get a certificate called a C79 to support this) but the duty won't be - so it may be worth doing a bit of research.
If you don't go for any of these reliefs, then after the US goods are cleared at import, they're just like UK goods. Then same conditions apply for zero rating the export.
Thanks three, you really know your stuff! I have been researching this online all day and am just tying myself in knots! Is this normally something we would ask our accountant to deal with? Not sure how involved we need to be in the paperwork side. The company in Algeria have a freight forwarder they use in the UK so we will send the goods to them for export so as far as we know at the minute they will be dealing with all of the customs paperwork for the export. So I'm assuming we just need proof of export for the VAT return?
Depends on the reputation of the forwarder really. HMRC come chasing you for any under-declared VAT (plus interest plus penalties sometimes) so its really worth having someone look over the paper work. At bare minimum you need proof goods have physically left UK shores for VAT records.
Sometimes freight forwarders operate customs warehouses too, again worth checking.