UK VAT on Goods — The Two Questions Every Business Must Answer
Two questions decide the VAT treatment on every goods order: where are the goods being delivered, and who is clearing customs? Get both right and the correct rate follows automatically.
Where Are the Goods Delivered?
If the delivery address is in the UK — England, Scotland, Wales, or Northern Ireland — you charge 20% standard rate VAT on both the goods and the shipping. No exceptions.
If the goods are going abroad, UK VAT is zero-rated on departure. But you must then ask the second question.
Who Is the Importer — You or the Customer?
The Incoterms on the order determine this.
- DAP / DDU — the customer is the importer of record. They clear customs and pay import VAT and duty on arrival. You charge 0% UK VAT and keep proof of export.
- DDP — you are the importer of record. You clear customs in the destination country. You still charge 0% UK VAT on departure, but you may owe local VAT in the destination country. Always check with your accountant before quoting DDP terms.
What About Shipping Costs?
Shipping always follows the goods. If the goods are 20% (UK delivery), shipping is 20%. If the goods are zero-rated (export), shipping is zero-rated too. Never mix rates on the same order.
Quick Reference
| Scenario | VAT to charge |
|---|---|
| UK delivery — any customer | 20% UK VAT |
| Export — DAP, customer is importer | 0% (zero-rated export) |
| Export — DDP, we are importer | 0% UK VAT + possible local VAT abroad |
Frequently Asked Questions
Q: Does a customer's VAT number change what UK VAT I charge on goods? A: No. For goods, delivery location and importer status determine the VAT rate — not whether the customer is VAT-registered. Their VAT number is useful for their own import paperwork and overseas VAT recovery, so collect it for business customers, but it does not affect your invoice.
Q: What proof of export do I need to justify zero-rating? A: You need evidence that the goods physically left the UK — carrier invoices, bills of lading, CMR documents, or tracking confirmation showing delivery abroad. Keep these on file. If HMRC asks and you cannot produce them, they can assess 20% VAT retrospectively.
Q: What if I cannot get the Incoterms agreed before quoting? A: Treat it as DDP until confirmed otherwise and check with your accountant before issuing a price. Offering DDP without understanding the local VAT implications in the destination country is one of the most common and costly mistakes on export orders.
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