Pre-requisites for exporting - am I missing anything?

[Banzai]

Apologies in advance on the long post. I would like input from members to confirm that I have identified everything I need for the following and obtain advice/pointers for anything I may have overlooked.

I am looking to export recreational & sports goods from the UK to out of the EU. I have a Limited company for another purpose so I assume that a new Limited company would be the right vehicle to trade through. My business model would be to purchase goods from UK suppliers and sell on (in GBP) to my international customer - who has committed to arranging the freight through their preferred forwarding company. The destination country is not subject to any sanctions and the goods are not classed as restricted.

Set-up
In addition to a Ltd company and a business bank account, I believe that I would need to set up the following (based on research from gov and greatgov websites):

• EORI number
• VAT number

A couple of questions spring to mind related to the above:

1. Would there be any other one-time set up required such as an export operator license?
2. As payment by my international customer isn't an issue, would it be wise/possible to arrange insurance for any shipping related issues or even issues related to my dealings with my suppliers?

Export admin
Once all of the above has been set up, I understand that I would need have the following in place for each export:

• Goods commodity code (for the export declaration and commercial invoice)
• Harmonised system (HS) tariff code (for the export invoice)
• Export invoice

I assume that although freight will be handled on my behalf, I would still be responsible for ensuring the labelling is correctly displayed. I suspect that the forwarding company would be best placed to advise me on the following: if the forwarding company arranges for a container, would labelling need to be affixed on the container?

Additionally, I have checked macmap website using a HS code I think is appropriate and found that the rate is 5%. I assume that my customer and I would need to agree on who foots this additional cost.

Accounting/Zero VAT
With regards to accounting, I am a little unsure about how the VAT element would work. When I purchase from my suppliers, I would pay the applicable VAT (e.g. 20%). When selling on to my customer, I would apply Zero VAT as the conditions mentioned on gov uk (notice 703) would apply. Would HMRC then refund the VAT difference? A worked example is below:

Price of goods bought: £100 + £20 VAT
Price of goods sold: £100
VAT due to/from HMRC: -£20

I have read the following thread on Zero rate VAT but that doesn't cover this example: "Zero Rating VAT for Order going to UK the Non-EU"

I trust that this has captured all the salient points in detail and has demonstrated that I have given sufficient thought and research into the topic.

 

[The Byre]

Having someone on-hand who deals with all that guff is vital. That way you are free to work creatively and not worry about bureaucracy. A sit-down-and-talk-through session with your accountants would be a very good idea, preferably accompanied by the person who is going to deal with all that paperwork and will be working with the freight company.

And yes, HMRC refunds the VAT.

As VAT-fraud is rising and seems to have become a fairly popular sport, having the right accountancy practice (i.e. deeply respected and with a squeaky-clean record) is existentially important.

 

[GraemeL]

sell on (in GBP) to my international customer - who has committed to arranging the freight through their preferred forwarding company

You must have acceptable (To HMRC) evidence of export in order to reclaim VAT. Be careful if someone else is dealing with freight, it is you who must be able to prove goods have left this country. It is you who will be liable if there is insufficient proof.

 

[Mike Foulds]

Whilst I cannot comment on the accounts side of thing, I would also strongly recommend sitting and discussing your plans with 1 or more freight forwarders, who will be able to give you advice about the shipping side of things. As you've mentioned, having the EORI in place, along with a list of Commodity codes (These are the same as HS codes), along with knowing the CPC code of the exports you are planning. Regardless of whether your customer will be arranging the freight, knowing pitfalls will help, and you never know when your customer may not be able to get a suitable service, and ask for your help. For insurance, I would suggest you speak to a broker, and arrange a global transport policy, which will cover goods whilst in transit anywhere in the world. Technically, until your customer has paid, or received the cargo, the risk for shipping is at their expense, if you are selling on an Ex-Works basis, but in the event of an unforseen event, this would allow you additional safety.

 

[Banzai]

Having someone on-hand who deals with all that guff is vital. That way you are free to work creatively and not worry about bureaucracy. A sit-down-and-talk-through session with your accountants would be a very good idea, preferably accompanied by the person who is going to deal with all that paperwork and will be working with the freight company.

And yes, HMRC refunds the VAT.

As VAT-fraud is rising and seems to have become a fairly popular sport, having the right accountancy practice (i.e. deeply respected and with a squeaky-clean record) is existentially important.

Thanks for that tip, are you suggesting that I employ someone to deal with the admin or did you mean finding an accountant who would do the admin over and above the regular accounting work? Does this forum have a list of recommended accountants who are well versed in this or is there any specific type of offering I should be looking for from accountants?

You must have acceptable (To HMRC) evidence of export in order to reclaim VAT. Be careful if someone else is dealing with freight, it is you who must be able to prove goods have left this country. It is you who will be liable if there is insufficient proof.

Although my customer is very close to me, your advice has given me something to think about for the future.

Whilst I cannot comment on the accounts side of thing, I would also strongly recommend sitting and discussing your plans with 1 or more freight forwarders, who will be able to give you advice about the shipping side of things. As you've mentioned, having the EORI in place, along with a list of Commodity codes (These are the same as HS codes), along with knowing the CPC code of the exports you are planning. Regardless of whether your customer will be arranging the freight, knowing pitfalls will help, and you never know when your customer may not be able to get a suitable service, and ask for your help. For insurance, I would suggest you speak to a broker, and arrange a global transport policy, which will cover goods whilst in transit anywhere in the world. Technically, until your customer has paid, or received the cargo, the risk for shipping is at their expense, if you are selling on an Ex-Works basis, but in the event of an unforseen event, this would allow you additional safety.

Thanks, that is all very helpful. I'll look further into commodity and CPC codes. You are right, I should speak to a freight forwarder to at least understand what is involved. Regarding the insurance, as I mentioned above that the customer is very close to me, but I think having insurance would help protect us both as you correctly pointed out. Are there any brokers that you could recommend or any search terms I could use?

 

[Ray272]

Bit unsure why you need to open a seperate company. If company is ltd it should be ok.

Carousel fraud I believe it is called. If you start exporting and reclaiming large vat repayments expect a bit of poking around from HMRC. Had them on my case the first year. They have never bothered us since.

Had to pay my accountant about 700 to deal with them and they take a your guilty until proven innocent approach which was a bit of a shock but makes sense to me now.

I would not go into any freight forwarder with a naive entrance, will cost you more.

Depends on how goods are packed too, labelling. Goods which are not visibly or checkable through visual check of course need more labelling requirements. Of items were large pcs of sport equipment labelling may not need to be so detailed.

When shipping goods by container and of goods are large items, photos of the packing showing the care to protect the goods are important.

Unsure why you would even consider helping client foot the bill for their duty tariffs.

Maybe factor it at the quote and make them aware of the appicabble duty rate on their end prior and then there would be no issue.

The task you are undertaking is not so difficult and you should get your hands dirty for a bit so then you can understand the procedures and understand how to do them and how much it really would be worth paying someone to do in the future.

Packing list
Commercial invoices
Instrastat/commodity data


I am sure one could find a few videos of the process on youtube.

 

[Mike Foulds]

Thanks for that tip, are you suggesting that I employ someone to deal with the admin or did you mean finding an accountant who would do the admin over and above the regular accounting work? Does this forum have a list of recommended accountants who are well versed in this or is there any specific type of offering I should be looking for from accountants?



Although my customer is very close to me, your advice has given me something to think about for the future.



Thanks, that is all very helpful. I'll look further into commodity and CPC codes. You are right, I should speak to a freight forwarder to at least understand what is involved. Regarding the insurance, as I mentioned above that the customer is very close to me, but I think having insurance would help protect us both as you correctly pointed out. Are there any brokers that you could recommend or any search terms I could use?

As has been mentioned, before speaking to a freight forwarder about your shipping, make sure you have a good understanding of, and plan, of what you hope to acheive, and how you think it should be done. I can recommend a broker we have used in the past, please e-mail me at [email protected], and I'll send you their details. I would also recommend that, the person who would know best what labelling is required, would be your customer at point of destination. From a customs point of view, the information required is mainly the invoice and packing list, and any description on packaging is a bonus, and would only be seen in the event of an examination. Your customer has to handle/receive cargo, so he would need to be able to read and interperet labelling. Hope that helps.

 

[The Byre]

Thanks for that tip, are you suggesting that I employ someone to deal with the admin or did you mean finding an accountant who would do the admin over and above the regular accounting work? Does this forum have a list of recommended accountants who are well versed in this or is there any specific type of offering I should be looking for from accountants?

You need someone on the staff who is experienced in import and export processing. Just knowing that any kind of bureaucracy has been taken care of gives you the room to breathe. Getting the right person is important and we went through a few before finding the right one. One mad woman insisted on using Sage which was completely incompatible with all other software. She and Sage were given the heave-ho.

This can be a retired part-timer coming in one day a month or a week if the business cannot carry a full-time employee and can do all the bookkeeping and admin duties.

We pay extra for using really good accountants but confine their input to just the end-of-year stuff. They came to us on the recommendation of our lawyers.

 

[laudhh]

Hi Does anyone know of a good mailing list of UK importers & exporters or UK companies involved in import /export, thanks

 

[Banzai]

Hi all, apologies on the radio silence on this thread. I have been thinking about this and have been discussing with my international 'partner'. If we assume that the suppliers have in-house knowledge of international shipping requirements and will do all the necessary leg work to ship directly to the destination, all that would be left is for my UK Ltd company to pay the supplier's invoice, and then in turn, my Ltd company would invoice the overseas company.

Where I'm stuck here is that the supplier is shipping out of the UK, but would be charging a UK company. As the goods are leaving the UK, is the supplier best placed to claim back VAT from HMRC? Or would my Ltd company have to pay the invoice + VAT and then claim this back from HMRC with proof that the goods were sent out of the UK on my company's behalf?

 

[Banzai]

You need someone on the staff who is experienced in import and export processing. Just knowing that any kind of bureaucracy has been taken care of gives you the room to breathe. Getting the right person is important and we went through a few before finding the right one. One mad woman insisted on using Sage which was completely incompatible with all other software. She and Sage were given the heave-ho.

This can be a retired part-timer coming in one day a month or a week if the business cannot carry a full-time employee and can do all the bookkeeping and admin duties.

We pay extra for using really good accountants but confine their input to just the end-of-year stuff. They came to us on the recommendation of our lawyers.

Thank you for this helpful response. My international 'partner' is famliar with suppliers based here and is confident that they will be able to handle all export shipping requirements in-house. I will however make note of this tip for future reference as it makes a lot of economical sense!

 

[japancool]

Obviously make sure your goods meet any certification requirements in the destination country. Or more to the point, get your customer to check that. Last thing you'd want is for the goods to be impounded because they lack a standards mark.

 

[Banzai]

Obviously make sure your goods meet any certification requirements in the destination country. Or more to the point, get your customer to check that. Last thing you'd want is for the goods to be impounded because they lack a standards mark.

Thanks, will be sure to pick up on this.

 

[Banzai]

Hi all, apologies on the radio silence on this thread. I have been thinking about this and have been discussing with my international 'partner'. If we assume that the suppliers have in-house knowledge of international shipping requirements and will do all the necessary leg work to ship directly to the destination, all that would be left is for my UK Ltd company to pay the supplier's invoice, and then in turn, my Ltd company would invoice the overseas company.

Where I'm stuck here is that the supplier is shipping out of the UK, but would be charging a UK company. As the goods are leaving the UK, is the supplier best placed to claim back VAT from HMRC? Or would my Ltd company have to pay the invoice + VAT and then claim this back from HMRC with proof that the goods were sent out of the UK on my company's behalf?

Hoping someone can shed light on this

 

[japancool]

Hoping someone can shed light on this

If you are VAT registered, then you simply claim back the VAT you paid for the goods as you would normally for any VATable purchase.

Then you invoice your international, non-EU customer WITHOUT VAT.