VATRESNI1300 - Introduction: The law

EU law

The Principal VAT Directive 2006/112/EU

  • Article 131 - states that Member States shall lay down conditions that apply to exemptions (zero-rating in the UK) to prevent evasion, avoidance or abuse. Each Member State sets conditions for operating the scheme.
  • Article 147 - provides the legal basis for the basic principles of the VAT Retail Export Scheme in UK law.

UK primary legislation

VAT Act 1994 (VATA 94)

  • Section 30(8) and
  • Section 30(10)
  • Schedule 9ZB (inserted by Taxation (Post-transition Period) Act 2020

Section 30(8) of the VAT Act 1994 permits the zero-rating of goods supplied for export to a destination outside the EU subject to compliance with conditions imposed in regulations or elsewhere.

Section 30(10) permits the Commissioners to demand payment of output tax from the person to whom the goods were supplied or any person found in possession of the goods in the UK where:

  • goods supplied for export have not been exported; or
  • relevant conditions for zero-rating the supply have not been met.

Subsections (8) and (10) are modified by Sch 9ZB, Part 3, paragraphs 9 and 10, which prevent them from applying to the export of goods from Northern Ireland to a place in the member States.

UK secondary legislation

The VAT Regulations 1995 (SI 1995/2518) as amended by the VAT(Miscellaneous Amendments, Northern Ireland Protocol and Savings and Transitional Provisions)(EU Exit) Regs 2020 and the VAT(Northern Ireland)(EU Exit) Regulations 2020, provide definitions and conditions for zero-rating:

  • Regulation 133(A) outlines imports, exports and removals in respect of Northern Ireland
  • Regulation 133(C) outlines the conditions for zero-rating goods supplied under the VAT retail export scheme in Northern Ireland.

Northern Ireland regulations 2020/1546:

  • Regulation 9, requires a supplier who has zero-rated goods that are removed from NI to GB to be treated as the importer of the goods and account for VAT.

Tertiary legislation

The conditions set out in Notice 704 VAT Retail Export Scheme (Northern Ireland) lays down the conditions that must be met in full for supplies of goods for export outside the EU and Northern Ireland under the VAT retail export scheme to be zero-rated. In this respect the notice has the force of law.

A simplified notice, Notice 704/1 Claim VAT back on tax-free shoppingin Northern Ireland, for travellers departing from the European Union, highlights the main aspects of the scheme.