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HMRC internal manual

VAT Cost Sharing Exemption Manual

General provisions: What is the input tax treatment in relation to supplies to overseas customers?

The normal UK policy when a UK taxpayer makes supplies to overseas customers that is outside the scope of UK tax but would have been exempt if made in the UK and which may or may not be viewed as exempt in the country where they are received, is that no UK input tax deduction on the cost components of those supplies is allowed.

This is based in UK law on s26 of the VAT Act 1994; the supplies are outside the scope of UK VAT, they would have been exempt if supplied in the UK and they are not specified supplies under the Specified Supplies Order, SI 1999/3121.

The UK cannot take tax treatments in other countries into account, irrespective of whether they are Member States or third countries.