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HMRC internal manual

VAT Place of Supply (Goods)

Gas and electricity: Place of supply

UK law

The place of supply rules are set out in the VAT (Place of Supply of Goods) Order 2004 (see VATPOSG5220).

Normal rules

The place of supply for wholesale supplies (i.e. purchases for resale) of both natural gas and of electricity is where the customer’s business is established. For supplies to final consumers the place of supply is where the natural gas or electricity is consumed.

If anything supplied for consumption is not consumed, or is only part-consumed (for example, where a major consumer overestimates their expected level of consumption and uses the balance for purposes other than consumption, such as selling it on) the place of supply of the un-consumed element of the original supply becomes the place where the customer’s business is established.

Special rules

There are two special rules. The first applies where a supply is to somebody who intends to resell the natural gas or electricity as part of a different supply. This can occur where a landlord rents property to a tenant and the rent is inclusive of any gas or electricity consumed by the tenant. The second special rule applies where the supply is to a member of a VAT group registration who is to resell the natural gas or electricity for consumption by another member of the same group.

In both cases, the supply for resale is exceptionally treated as being consumed by the recipient (that is the landlord or first group member respectively) at the place where actual consumption takes place. This ensures that the natural gas and electricity concerned remains liable to taxation at the place of consumption.