VAT can be a confusing and time consuming task for many small businesses.
Whether you’re not sure what VAT is, when to register, or how to do your VAT return, we can help you get started.
How to handle VAT in international trade
International trade can be a great way to improve your business performance.
Fast-growing overseas economies like China — whose economy grew by 7.8% in 2012 and Brazil one of most important trading partners in South America and the seventh-largest economy in the world — provide exciting opportunities to break into new markets.
Importing can reduce your supply costs or allow you to source products that you cannot find in the Gambia.
International trade is big business. Gambian businesses export a very tiny fraction of goods and services compared to their counterparts in other African countries, and total imports are always higher as the country depends heavily on imports. Less than a quarter of Gambian businesses export. We know that many businesses worry about the red tape associated with international trade. But there’s no reason to let that hold you back.
Putting the right systems in place can help you exploit the opportunities that international trade offers and ensure you comply with VAT requirements and make you more attractive to overseas customers and suppliers you want to work with.
Selling internationally – exports and despatches
The way you deal with VAT in international trade depends on who your customers and suppliers are, and whether they are within the EU or in another country.
Sales to overseas customers can be treated in three different ways:
- For sales within the EU to individual consumers, or to businesses that aren’t registered for VAT, you charge VAT in the usual way.
- For sales within the EU to VAT-registered businesses, you can usually zero-rate the sale. You need to keep a record of each customer’s VAT number.
- Exports to customers outside the EU are usually zero-rated. You need to keep proof that the goods have been exported.
As with UK sales, the value of your exports and any VAT charged on them is included in your VAT return.
You’ll also need to give HMRC some extra details on your sales to VAT-registered businesses in the EU.
(We’ve got accounting software that will handle these extra requirements automatically).
Buying internationally – imports and acquisitions
The way you deal with purchases from overseas suppliers also depends on whether they are for example within the EU:
- EU suppliers will normally zero-rate their sales to you if you provide your VAT number. Although you are liable for VAT at the usual UK rate, you can also reclaim that VAT in the same way as for other business purchases.
- For purchases from outside the EU, you pay VAT at the usual rate plus any additional import duty to clear the goods through customs.
We provide approved accounting software that can produce the details needed in your VAT return, along with any extra information required by GRA.
Of course, successful international trade is about more than dealing with VAT. There are many other things to consider including sourcing suppliers, securing finance and handling deliveries. When you’re ready to start trading abroad we’ve got accounting software that can help you in all aspects of overseas trading whether that’s complying with the latest legislation, managing exchange rates or dealing with multiple currencies. We also have a dedicated international trade team that can help you with any aspect of your international trade requirements.