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HMRC internal manual

VAT Place of Supply (Goods)

From
HM Revenue & Customs
Updated
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Main rules: goods remaining either within or outside the UK

EC Law

Articles 31 and 32 of the Principal VAT Directive
 

  1. Where goods are not dispatched or transported, the place of supply shall be deemed to be the place where the goods are located at the time when the supply takes place.

  2. Where goods are dispatched or transported by the supplier, or by the customer, or by a third person, the place of supply shall be deemed to be the place where the goods are located at the time when dispatch or transport of the goods to the customer begins.

UK Law

Section 7 VAT Act 1994
 

7(2) Subject to the following provisions of this section, if the supply of any goods does not involve their removal from or to the United Kingdom they shall be treated as supplied in the United Kingdom if they are in the United Kingdom and otherwise shall be treated as supplied outside the United Kingdom.

Commentary

This covers two straightforward situations. Both serve to underline the normal principle (but see VATPOSG5000 for gas and electricity) that for goods to be taxed in the UK they must at some stage be located in the UK. Consequently a supply involving goods that remain in the UK takes place in the UK, whereas a supply involving goods that do not enter the UK takes place outside the UK.

The first category describes what are often referred to as domestic supplies. It therefore covers the vast majority of supplies that are subject to UK VAT.

The second category is also largely self-explanatory. However, perhaps less obviously, it also includes goods supplied on the high seas even if the new owner subsequently brings the goods into the UK. The important point here being that the supply itself does not involve removal to the UK. Also included in the second category are goods supplied by a UK business in circumstances where the goods are sourced from a supplier outside the UK and delivered direct to a customer similarly located outside the UK. The involvement of the UK supplier, the issuing of invoices from the UK and receiving payment here, are all immaterial when it comes to fixing the place of supply.