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HMRC internal manual

VAT Place of Supply (Goods)

Main rules: distance selling: distance sales from the UK


EU Law {#}

Articles 33 and 34 Principal VAT Directive (see VATPOSG3520)

UK Law {#}

Section 7 VAT Act 1994

7(5) Goods whose place of supply is not determined under any of the preceding provisions of this section and which do not consist in a new means of transport shall be treated as supplied outside the United Kingdom where -

(a)the supply involves the removal of the goods, by or under the directions of the person who supplies them, to another member State;

(b)the person who makes the supply is taxable in another member State; and  
(c)provisions of the law of that member State corresponding, in relation to that member State, to the provisions made by subsection (4) above make that person liable to VAT on the supply;

but this subsection shall not apply in relation to any supply in a case where the liability mentioned in paragraph (c) above depends on the exercise by any person of an option in the United Kingdom corresponding to such an option as is mentioned in paragraph 1(2) of Schedule 2 unless that person has given, and has not withdrawn, a notification to the Commissioners that he wishes his supplies to be treated as taking place outside the United Kingdom where they are supplies in relation to which the other requirements of this subsection are satisfied.

Commentary {#}

Section 7(5) applies where a UK supplier is making distance sales (see VATPOSG3510) to customers in another EU Member State. Without it the place of supply is the UK as it is the Member State of departure of the goods (see VATPOSG3810). But in cases where a UK supplier

  • has exceeded the threshold for such supplies in the Member state of arrival (see below); or
  • has distance sales below the threshold but has nevertheless opted by giving written notice to HMRC to register for VAT there, or
  • the goods are subject to excise duty in the Member State of arrival

then the place of supply becomes the Member State of delivery and the supplier is liable to register for VAT in that Member State. 

The tests in Section 7(5) apply to each Member State individually, so a liability (or option) to account for distance sales in one Member State does not automatically mean they are liable or have opted in any other State.

Under EU law the distance selling threshold can only be set by Member States at either 35,000 Euros (approximately £24,000) or 100,000 Euros (approximately £70,000).

You should note that section 7(5) in providing for the supply to be ‘treated as supplied outside the United Kingdom’ does not actually prescribe the alternative place of supply. For this the UK supplier must look to the relevant legislation in the Member State concerned. That same domestic legislation will also determine the UK supplier’s liability to register in the Member State of delivery.