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HMRC internal manual

VAT Single Market

Supply and acquisition: acquisition: scope

The scope of the acquisition arrangements is set out in Article 2(1)(b) of the Principal VAT Directive (see VATSM3310) and sections 1(1)(b) and 10(1) of the VAT Act 1994 (see VATSM3315).

The requirement of section 10(1)(b) that ‘the acquisition is otherwise than in pursuance of a taxable supply’ often causes confusion. What it means is that the supply to which the potential acquisition relates is not itself a taxable supply in the UK. In other words, most intra-EC movements of goods will be as a result of a supply by an EC supplier that takes place outside the UK - normally in the Member State of removal (for more information about this see the manual covering place of supply of goods (VATPOSG)). Consequently it is not a ‘taxable supply’ as defined in UK law and so the goods are subject to UK acquisition requirements.

But in some cases the removal will be in respect of a supply that will be treated as taking place in the UK and so will represent a taxable supply within the meaning of the VAT Act. A good example of this is a supply that requires installation or assembly in the UK (see VATSM5100). The place of supply is the UK and so the supply is liable to UK VAT. No acquisition VAT is therefore due on the initial removal of the components to the UK.

Furthermore, because the supply contemplated by 10(1)(b) is the supply that gives rise to the removal of the goods to the UK, it does not preclude an acquisition in cases where the goods are to be subject to an onward supply in the UK by the person receiving them.

Normally only goods received by UK taxable persons are treated as acquisitions. However, under section 10(1)(c), goods subject to excise duty (see VATSM6400) and new means of transport (see the manual covering new means of transport (VATNMT)) are exceptionally treated as acquisitions regardless of the status of the person acquiring them.