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HMRC internal manual

VAT Place of Supply (Goods)

Main rules: distance selling: delivered goods

As set out in VATPOSG3510, the distance selling rules are dependent upon whether the supply is of delivered goods.  If the goods are not “delivered” by or under the directions of the supplier then neither Section 7(4) nor 7(5) conditions will be met; instead we would have to look at whether Section 7(7) might apply (see VATPOSG3810).

Some businesses have sought to avoid the consequences of Section 7(4) and 7(5) by artificially splitting the supply of the goods from the delivery. Generally, this is achieved by offering the goods for sale and the consumer an “option” to enter into a “separate” delivery contract with a (often related) third party entity. This allows the business to claim that their supply was not of delivered goods so the place of supply remains the State of supply. By this they avoid the need to register in any other Member State.

The UK and Belgium consulted the EU VAT Committee who issued a guideline that, for the purposes of Article 33 of the VAT Directive, goods shall be considered to have been dispatched or transported by or on behalf of the supplier in any cases where the supplier intervenes directly or indirectly in the transport or dispatch of the goods.

This set out the following points.

The supplier shall be regarded as having intervened indirectly in the dispatch or transport of the goods in any of the following cases:

  1. where the transport or dispatch of the goods is subcontracted by the supplier to a third party who delivers the goods to the customer;
  2. where the dispatch or transport of the goods is provided by a third party but the supplier bears totally or partially the responsibility for the delivery of the goods to the customer;
  3. where the supplier invoices and collects the transport fees from the customer and further remits them to a third party that will arrange the dispatch or transport of the goods;
  4. the supplier actively promotes the delivery services of a third party to the customer, puts the customer and the third party in contact and provides to the third party the information needed for the delivery of the goods.

The guideline went on to confirm that goods shall not be considered to have been dispatched or transported by or on behalf of the supplier where:

  1. the customer transports the goods himself;
  2. the customer arranges the delivery of the goods with a third person and the supplier does not intervene directly or indirectly in providing or helping organising the dispatch or transport of those goods. Note that VAT Committee guidelines represent the views of the Committee and are not legally binding but can be persuasive in court.  The UK has adopted the Guideline as set out above.  If you come across a case where you think the guideline may need to be applied then first contact VAT Advisory Policy team with the full facts.