UK Tax Treatment of International Exporting: A Focus on the USA

Exporting goods from the UK to international markets, including the USA, involves navigating a complex landscape of tax regulations. A challenge at the best of times but a potentially mindboggling one in the current climate of uncertainty.

Nevertheless, understanding these rules is crucial for businesses aiming to maintain or expand their reach into potentially lucrative overseas target markets, while ensuring compliance with tax laws.

VAT on Exports

One of the primary considerations for UK businesses exporting goods is the treatment of Value Added Tax (VAT). Generally, goods exported from the UK to destinations outside the UK, including the USA, can be zero-rated for VAT purposes.

To qualify for zero-rating, exporters must obtain and retain evidence that the goods have left the UK. This evidence can include commercial invoices, transport documentation and customs declarations.

Customs Duties and Tariffs

You might have seen just a little bit about this in the news recently, so where do we start?

Well, depending on what is being exported, tariffs are not new and while UK businesses exporting to the USA have previously had to consider customs duties and tariffs, these were generally well-ordered, stable and moderate – a mix based on World Trade Organisation (WTO) frameworks, bilateral agreements and sector/goods specific measures.

Currently, uncertainty is off the charts, with the US tariff position changing on a day-to-day basis at the whim of President Trump, and that makes trading – and indeed the very viability of it – incredibly difficult to plan.

Given that you can’t influence Trump policy announcements, what you need to be is well organised.

To facilitate a smooth export process, UK exporters should ensure that their goods are correctly classified under the Harmonized Tariff Schedule and that all necessary documentation is prepared. This includes the commercial invoice, packing list and certificate of origin, which helps determine the applicable tariffs and duties. More on this below.

Additionally, in as much as this is possible, exporters and their customers should try to keep on top of any trade negotiations or agreements between the UK and the USA that might affect tariff rates and the timing of trades. Utilising resources such as the UK Department for International Trade and the US International Trade Administration can provide valuable insights and support.

As the time this article was written, the UK will have a 10% default tariff rate. It remains to be seen whether this might be improved.

Export Documentation

Proper documentation is essential for efficient international exporting. Key documents include:

• The commercial invoice, which details the transaction and is used by customs authorities to assess duties and taxes.
• The packing list provides information on the contents of the shipment.
• The certificate of origin verifies the country where the goods were produced – important as US tariffs are based on the origin of the goods imported into the US, not simply where the goods are exported from.

For exports to the US, it is also important to comply with the regulations set by the US Customs and Border Protection. This includes submitting the necessary import declarations and ensuring that the goods meet all US standards and regulations.

Failure to comply can result in delays, fines or even the rejection of the shipment.

To sum up

Exporting goods from the UK to the US remains a significant opportunity for businesses, but it also requires more careful attention than ever to tax treatment and compliance for UK exporters to effectively manage their international operations, stay competitive and capitalise on the benefits of international trade.

It makes sense for companies exporting to the US to continually model the likely cost impact on their supply chains.

And whilst the current uncertainty originating from the US naturally affects global trade, one hopes the position will stabilise with the right approach.

Need support navigating the complexities of international trade? Contact Paul Webb for tailored advice at paul.webb@westcotts.uk or 01392 288555.