VATNIEU4680 - Transfers of own goods: Exceptions: Temporary movements of goods between Member States
Background
Under Article 4 of the VAT (Removal of Goods) Order 1992 (see VATNIEU4230) certain temporary movements of goods between member states for business purposes are disregarded as transfers of own goods. This does not include goods that are to be offered for sale, or otherwise disposed of, in the member state of destination.
4Subject to article 5 below, paragraph 30(1) and (2) of Schedule 9ZB to the Act shall not apply to the following removals of goods from a member state to a place in any other member state
Goods to be used to make a supply of services.
Article 4(f) applies to goods that are transferred temporarily to an EU member state for the purposes of making a supply of services there.
(f) where:
(i) the owner isestablished in the departure country and is note stablished in the destination country.
(ii) they are removed for the sole purpose of their being used by the owner in the course ofa supply of services to be made by him.
(iii) at the time of their removal there exists a legally binding obligation to make that supply of services; and
(iv) the owner intends to remove them to the departure country upon his ceasing to use them in the course of making the supply.
So, subject to:
- the owner having a place of business in the member state of dispatch
- not having a place of business in the member state in which the services are to be performed
- having a specific contract to fulfil, and
- an intention to return the goods to the member state from which they were dispatched
- the removal of the goods in question is not treated as a transfer of own goods.
This typically covers tools and equipment to be used to perform a service and situations where the goods themselves are to be the subject of the supply - for example where they are to be loaned, hired or leased.
Other temporary movements
Article 4(g) applies to goods which are transferred to an EU member state for temporary use there
(g) where:
(i) temporary importation relief would have been afforded had the goods been imported from a place outside the member states and Northern Ireland; and
(ii) the owner intends, before the end of the period of two years beginning with the day on which the goods were removed, to:
(aa) export the goods to a place outside the EU and Northern Ireland,
(bb) remove the goods from Northern Ireland to Great Britain, or
(cc) remove the goods to a place in Northern Ireland or a memberstate (as the case may be) other than the destination country.
Provided:
- they would be eligible for temporary importation relief if imported from outside the EU; and
- they are to remain in the member state for no longer than 2 years, after which they are either to be exported out of the EU or removed to an EU member state.
Details of goods which are eligible for temporary import relief can be found in theTemporary Admission guidance.
Return or onward movement of the goods
The eventual return or onward movement of the goods, as required under Article 4(f)(iv) and 4(g)(ii) respectively, is similarly disregarded as a movement of own goods by Article 4(h).
(h) where the goods are removed in accordance with an intention described in paragraph (e), (f)(iv) or (g)(ii) above.
Records
Although they are not treated as supplies for VAT purposes, the owner of the goodsis required to maintain a register of temporary movements (see VATNIEU7430) and hold commercial evidence covering their whereabouts.
Failure to return or remove the goods
Under article 5 of the Order, exclusion from treatment as a transfer of own goods is conditional on the intention to return or remove the goods.
5 In the case of a removal falling within paragraph (e), (f) or (g) above, it shall be a condition of paragraph 30(1) and (2) of Schedule 9ZBto the Act not applying that the relevant intention of the owner is fulfilled.
If circumstances change (for example the goods are sold or are to remain permanently in the member state to which they were dispatched) they will cease to qualify for treatment under these provisions. The original movement of the goods is treated belatedly as a transfer of own goods. Under regulation 42 of the VAT General Regulations 1995
42(1) This regulation applies:
(a) where goods have been removed:
(i) from Northern Ireland to a member state, or
(ii) from a memberstate to a different memberstate or to Northern Ireland; and
(b) the removal falls within paragraph (f) or (g) of article 4 of the Removal Order.
(2) Except where paragraph (3) below applies in respect of the same prescribed accounting period, the owner shall not make any entry in the VAT payable portion of that part of his VAT account which relates to the prescribed accounting period in which he would be liable to account for any VAT chargeable in respect of the removal.
(3) Where:
(a) the condition described in article 5 of the Removal Order has not been complied with, and
(b) an amount of VAT has become payable,
the owner shall make a positive entry for the relevant amount of VAT in the VAT payableportionof that part of his VAT account which relates to the prescribed accounting period in which the condition was notcomplied with.
Any VAT due is to be included on the VAT return for the period in which the ability, or intention, to comply withthe relevant condition ceases.