How is VAT on exported goods typically treated?

When goods are exported, they are typically zero-rated for VAT purposes. This treatment is designed to make exported goods more competitive in the international market. By applying a zero rate of VAT, businesses can sell their products without the added tax cost that would otherwise be applied if they were sold domestically. This not only encourages businesses to export but also allows them to recover any input VAT that was incurred in the production or acquisition of those goods.

The zero-rating of exported goods is a policy aimed at supporting exporters by eliminating the tax burden from the final price charged to foreign buyers. It ensures that VAT is not a barrier to competition for UK goods in overseas markets, thereby promoting trade and economic growth.

The other options, such as standard-rated, exempt, or charged at the domestic rate, would not support the intention of encouraging exports and would potentially make UK products less competitive internationally.