Q. I am an independent clothing retailer and recently sold some garments to a customer who resides in Australia. She asked if I was part of the retail export scheme. Can you explain what this is?
A. The VAT Retail Export Scheme allows customers to claim a VAT refund on most goods that have been purchased and then exported out of the European Community (EC). Retailers wishing to operate this scheme must be registered for VAT. It is voluntary and shops are under no obligation to operate it. If as a retailer you decide to operate the scheme, at the time of purchase you should ask for proof that the customer is eligible (the customer is eligible for refunds only if their permanent place of residence is outside the EC). Acceptable proof could be a document like a passport. You should then ask them to complete and sign a refund form, either an official Customs Form VAT 407, your shop's own version of it or a VAT Retail Export Scheme sales invoice. Till receipts alone are not accepted as proof of eligibility for a refund.
The goods must leave the EC by the last day of the third month in which the goods were purchased. At the port of departure, the customer may present the completed refund document to the appropriate HMRC representative and make the goods available for inspection. The refund form will then be certified if it is deemed that the goods are in order. The customer will then send the form back to the retailer who will make a repayment of VAT to the customer (the method by which the repayment is made should be agreed at the point of sale). In practice, the refund is often dealt with at the port of departure by a refund company which pays the customer the refund at once, minus its own handling charge, and reclaims the amount from the retailer.
For further information please contact the HMRC National Advice Service on 0845 010 9000 or download Customs Notice 704/1 VAT Retail Exports from www.hmrc.gov.uk.
If you need help with a trade procedures query, call the Helpdesk on
020 7215 8150 or email helpdesk@sitpro.org.uk 
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Return to SITPRO News: Issue 68, Spring 2009