Policy paper

Changes of VAT rules for call of stock arrangements between the UK and EU member states

Published 11 March 2020

Who is likely to be affected

Businesses sending or receiving goods between the UK and Member State (MS) of the EU in advance of the goods being ‘called off’ for delivery (call-off stock).

General description of the measure

This measure implements changes required by Council Directive (EU) 2018/1910 to simplify the VAT treatment of call-off stock moved from the UK to another MS or vice-versa. The changes permit a supplier in the State of origin to remove call-off stock to storage in another State, the destination State, without accounting for VAT on the transaction at that time. The supplier and customer will account for the supply and acquisition when the goods are called-off. This avoids the need for the supplier to register for VAT in the destination State.

Policy objective

The purpose of the changes is to simplify the VAT rules for ‘call-off’ stock and avoids the requirement for the supplier to register in the destination State.

Background to the measure

On 4 December 2018, the European Council adopted the VAT ‘quick fixes’ legislative package to harmonise and simplify certain rules and exemptions for cross-border supplies of goods with the aim of improving the VAT system for the taxation of trade between EU Member States. These changes are contained in Council Directive (EU) 2018/1910 which amends the Principal VAT Directive 2006/112/EC and MS of the EU and the UK were obliged to implement them by 1 January 2020.

Additional requirements are set out in the Council Implementing Regulation (EU) 2018/1912, which is directly applicable in the UK.

Detailed proposal

Operative date

The measure, which has a retrospective element, applies to goods removed from a MS of the EU to UK (or vice versa) on or after 1 January 2020.

Current law

There is no explicit reference in current legislation to call-off stock transactions. Current UK law makes provision in relation to intra-community supplies in sections 6, 7, 10, 11, 12, 13, 30, 65, 66 and 69 of the Value Added Tax Act 1994 (the VAT Act), Schedule 4 to the VAT Act and regulations 21, 22 and 22B of the Value Added Tax Regulations 1995 (the VAT Regulations).

Proposed revisions

Following the UK’s departure from the EU, we have now entered a transition period which lasts until 31 December 2020. During the transition period we are obliged under EU law to implement the Directive or risk substantial fines.

The position after the transition period will be determined by the outcome of negotiations on our Future Economic partnership with the EU.

The draft legislation for the new call off stock arrangements was published on 31 December 2019:

• New Schedule 4B of the VAT Act (“Schedule 4B”) contains conditions for the call off stock simplification to apply. The simplification delays the accounting for an intra-EU supply of call-off stock until the stock is called off by the customer
• provided that certain conditions are met, the supplier will make a supply of the call-off stock in the State of origin when the customer calls-off the stock in the destination State. The customer will make a corresponding acquisition of the goods in the destination State at that time. The supplier will not make a supply of the goods in the destination State and will not, therefore, be required to register for VAT in the destination State by reason of such a supply. The customer will account for acquisition tax
• Schedule 4B also contains provisions dealing with the consequences of certain events occurring after the goods arrive in the destination State, including the supplier’s failure to make a supply of the call-off stock to the intended customer within the 12 month period, the substitution of a different intended customer, and the return of the goods to the origin State
• amendments to section 69(1) of the VAT Act create a penalty where a customer in the UK in call-off stock arrangements fails to make the required record of transactions in a call-off stock register
• amendments to section 69(2) of the VAT Act create a penalty where a supplier of call-off stock in the UK or a customer in call-off stock arrangements in the UK fails to preserve the records kept in a call-off stock register.
• new regulation 22ZA of the VAT Regulations requires suppliers of call-off stock to include information relating to specified events in an EC Sales List, and sets out the related requirements
• amendments to regulation 21 and 22B of the VAT Regulations 1995 consequential on the insertion of new regulation 22ZA

There will be no obligation on suppliers to structure transactions so as to meet the conditions, but where a supplier does so, the supplier and customer must account for VAT in accordance with the legislation and comply with the legislation’s other requirements. Businesses which dispatch goods in circumstances which do not meet the conditions should continue to apply the current VAT accounting rules for EU cross-border transactions.

Summary of impacts

Exchequer impact

2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023	2023 to 2024	2024 to 2025
negligible	negligible	negligible	negligible	negligible	negligible

This measure is expected to have a negligible impact on the Exchequer.

Economic impact

This measure is not expected to have any significant economic impacts.

Impact on individuals, households and families

This measure has no impact on individuals as it only affects businesses. The measure is not expected to impact on family formation, stability or breakdown.

Equalities impacts

It is not anticipated that this measure will have impacts on groups sharing protected characteristics.

Impact on business including civil society organisations

This measure is expected to have a negligible impact on an estimated amount of less than 100 businesses by making changes to UK VAT law through simplifying the rules for UK/EU supplies of call-off goods. There are likely to be one-off costs of setting up the required records and familiarisation of the rules. Ongoing costs will could include keeping additional records and providing extra information to HMRC on the EC Sales List. Customer experience is expected to stay broadly the same as businesses are not obliged to arrange operational structures to meet the conditions of the new legislation. There is expected to be no impact on civil society organisations.

Operational impact (£m) (HMRC or other)

HMRC will need to update IT systems to accommodate the revised EC Sales List submissions, at an estimated cost of £2,122,000. It is not expected that there will be any additional staff costs.

Other impacts

There is no impact in respect of:

• carbon assessment
• sustainable development
• wider environment impact; health impact assessment
• climate and fuel poverty targets
• air quality targets
• rural proofing
• privacy impact
• competition impact

Other impacts have been considered and none have been identified.

Monitoring and evaluation

This measure will be monitored through information collected from tax returns and receipts, and through communication with affected taxpayer groups.

Further advice

If you have any questions about this measure, contact Peter Bennet on telephone: 03000 585559 or email: peter.bennet@hmrc.gov.uk.