Treatment of supplies of electricity and piped gas: cross-border supplies
An interconnector is a means of linking energy transmission systems between different countries. The UK has links with France (electricity), Ireland (gas) and Belgium (gas). In addition, there are several interconnectors across Europe. Consequently, electricity and gas can be supplied across borders.
Movements of goods
Consideration must first be given to the place of supply of the goods. The cross-border treatment of natural gas and electricity changed radically from 01/01/2005. The normal import/export and intra -EU supply/acquisition treatment of goods no longer applies. Instead there are now special place of supply rules, with the VAT treatment generally dependant on the place of consumption or where the customer belongs. For full details see VATPOSG5000: VAT place of supply of goods: gas and electricity and VAT Information Sheet 21/10: Place of supply of natural gas and electricity (also heat and cooling):.
Further guidance on cross border movements of goods can be found in:
- VAT Notice 702: Imports;
- VAT Notice 703: Exports of goods from the UK; and
- VAT Notice 725: The Single Market.
Shipping, transmission and interconnector access charges
These are all regarded as supplies of freight transport.
From 1 January 2010 the place of supply of freight transport follows the “general rule” for the place of supply of services; that is the place of supply is where the customer (who is in business) belongs. Full details can be found in VATPOSTR: VAT place of supply of transport. If the supply does not relate to imports or exports the liability will in most cases be standard-rated - full details can be found in VTRANS: transport.
Before 1 January 2010, and for supplies of freight transport after that date to non-business customers, the place of supply of intra-EU freight transport is where the freight transport begins. However, the place of supply may be switched to the customer’s member state if the customer is registered for VAT there.
If the supply is treated as made in the UK, it is standard-rated.
The supply of interconnector capacity is always treated as a supply of intra-EU freight transport. This is because the operator is only concerned with moving a net quantity of energy in one direction at a time between the UK and another member state.
In other circumstances, the place of supply of freight transport services is the country or countries where the transport takes place, to the extent that it takes place there. If the place of supply is the UK, the supply is standard-rated unless it forms part of a movement of goods to or from a place outside the EU, in which case it is zero-rated to the extent that it takes place in the UK.
Further guidance on freight transport services and the place of supply of services can be found in: