Basic principles: Basic conditions for zero-rating intra-EC removals
Goods removed from the UK to another Member State are normally liable to acquisition tax paid by the customer in that Member State. To avoid double taxation the law provides for the supplier to zero-rate the supply, subject to various conditions. In the UK, the conditions are set out in Regulation 134 VAT Regulations 1995. In simple terms, the goods must have been removed from the UK to a person who is VAT registered in another Member State. More detailed conditions are in section 4 of Notice 725 The Single Market and are that
- the customer’s valid EC VAT number, including the 2-letter country prefix code, must be shown on the VAT sales invoice
- the goods must be sent or transported out of the UK to a destination in another Member State and
- valid commercial evidence showing the removal of the goods from the UK must be obtained within time limits.
In most cases the time limit for removing the goods and obtaining evidence of removal is three months from the time of supply. This is extended to six months for goods involved in processing or incorporation before removal. The time of supply for goods supplied to a VAT registered customer in another Member State is the earlier of either
- the fifteenth day of the month following the one in which the goods are sent to the customer or the customer collects them, or
- The date of issue of a VAT invoice.
If a trader fails to account for VAT when conditions for zero-rating are not met, follow the assessment procedures described in VEXP90300.