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HMRC internal manual

VAT Place of Supply (Goods)

Gas and electricity: Introduction

Supplies of natural gas and electricity are treated as goods for VAT purposes. However, their method of transportation, untypical of delivered goods, always led to difficulties in applying the normal place of supply rules particularly in cases involving cross-border supplies. Consequently, from 1 January 2005 rules were introduced to simplify and modernise the VAT treatment. Since then supplies of natural gas and electricity have been subject to place of supply rules more commonly associated with supplies of services. As a result the place of supply is not always dependent on the physical location of the natural gas or electricity. Instead, in some cases, it depends on where the customer is established.

Further changes were made from 1 January 2011 including an extension in scope to heat and cooling supplied via a network. This applies to communal heating and air-conditioning systems which, elsewhere in the EU, can involve cross-border supplies. However, the change is unlikely to have any practical effect in the UK. Consequently this guidance continues to refer only to gas and electricity. Nevertheless, any reference to natural gas and electricity applies equally to heat and cooling.

The changes also included adjustments to the scope of the existing rules as they apply to natural gas. You can find out more about these changes in VAT Notice: 701/19 fuel and power

This special VAT treatment goes beyond the place of supply and affects other areas of the tax. Some of these other aspects are covered in this manual (see VATPOSG5800) and others elsewhere. You will therefore also need to consult the manuals covering

  • time of supply - VATTOS - and
  • the Single Market - VATSM.