By Claire West

There was a time when being a multinational meant big business. Not anymore. The growth of the internet along with cheaper air travel has made the world a smaller place and as a result a growing number of UK small businesses have built, or are preparing to build, a presence throughout Europe.

According to the 2011 HSBC Global Small Business Confidence Monitor one in four (20%) of small businesses in the UK are currently trading internationally and 40% of small businesses worldwide will be operating internationally by 2013.

In addition, according to a survey by the Federation of Small Businesses 23% of its members currently export products and services, and insight from Intuit UK found that the countries UK small businesses are most likely to trade with are Germany and France.

The appeal for UK small businesses to trade internationally is ever growing. While this creates new opportunities for UK businesses it also means owners need to understand and adhere to EU VAT handling legislation.

Diana Flier, Compliance Analyst at Intuit UK comments:

“With 20% of all UK small businesses already trading internationally the next two years will see an acceleration of trading across borders. While the European market offers up exciting opportunities for UK business owners it also means the legislative implications for correct VAT handling are of increasing concern. Small business owners need to make sure they understand the different rules for trade within and outside Europe and key to compliance will be having a good handle on the business’ books.”

Antony Stemp of Independent Business Accounting Limited provides some advice and tips for small businesses considering buying or selling goods within the EC Single Market.

·Get your head around the VAT terminology: Goods that are brought in the UK from any EC Member State are referred to as Acquisitions or Arrivals. The term Import is used for goods coming into the UK from countries outside the EC. Goods that are shipped out of the UK to EC Member States are known as Despatches or Removals. The term Export is used for goods that leave the UK and go to countries outside the EC.

· Know your VAT territory: The VAT territory of the EC Single Market comprises of 25 member states which are listed in notice 725 under section 2.4 on the HRMC website. The country you are acquiring goods from, or despatching goods to, is extremely important from a VAT reporting perspective. Transactions occurring within the Single Market are regarded as intra EEC supplies, whereas supplies outside this area are treated as imported / exported goods for VAT purposes.