Background: place of supply and its impact on the scope of VAT
The scope of VAT
The scope of UK VAT is defined in Section 4 of the VAT Act 1994 as follows
4(1) VAT shall be charged on any supply of goods or services made in the United Kingdom, where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him.
(2) A taxable supply is a supply of goods or services made in the United Kingdom other than an exempt supply.
As a result there are four important conditions that have to be met if something is to fall within the scope of UK VAT. These are
- there must be a supply of goods or services
- that supply must take place in the UK
- it must be made by a taxable person, and
- it must have been made by way of business.
If any of these conditions are not met the transaction is outside the scope of UK VAT. The place of supply rules address the second of these conditions, namely establishing whether the supply takes place in the UK.
Applying the place of supply rules
In most circumstances you will only need to determine whether a supply takes place within the UK. You should therefore restrict any formal rulings to whether a supply takes place here (and is therefore potentially liable to VAT), or to confirm it is elsewhere and therefore outside the scope of UK VAT.
In some situations, however, it may be necessary to establish whether a supply takes place within the EU. For example, in the case of goods installed outside the UK, as this will affect the type of evidence you might expect to see to confirm that the goods have left the UK.
But you should not offer an opinion or make a ruling on whether a supply is liable to taxation in a specific place outside the UK, or whether the supplier should be registered for VAT there.