If you are selling goods overseas, you can Zero Rate your supplies as long as you keep proof of dispatch. Services that are sold to overseas* are considered ‘Outside the Scope’ of VAT which means that not only is no VAT charged but the sale does not form part of the VAT return. The correct treatment is ‘No VAT’ on Xero.

*Occassionally an overseas company will commission services that are used by its UK operation. In this instance the normal 20% VAT should be applied as the services are being ‘consumed’ within the UK.