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HMRC internal manual

VAT Single Market

Simplifications: triangulation: background

Triangulation is the term used to describe a situation in which there are three parties in a chain involving the purchase and/or sale (as the case may be) of the same goods. But instead of the goods physically moving from one party to the next along the chain, they are delivered directly from the first supplier to the last. Consequently there is only one movement of the goods. But there are two supplies - the first between the first supplier and the intermediate supplier (middleman), and the second between the intermediate supplier and the final customer.

When illustrated diagrammatically as follows it produces a triangle - hence the name.

Use this link to view Triangulation diagram

In this example a UK company receives an order from a customer in Germany. This is fulfilled by dispatching the goods directly from the UK company’s own supplier in France. As the diagram illustrates, there are two supplies (i.e. between the French company and the UK company, and between the UK company and their German customer). But there is only one movement of the goods from France to Germany.

Applying the normal VAT place of supply rules in these circumstances will result in the UK company being registerable for VAT either in France or Germany. This arises because, without the goods moving to the UK, the UK company is potentially

  • making an intra-EC supply in France (where it purchases the goods) to Germany, or
  • receiving an intra-EC supply in Germany where it then makes an onward domestic supply to its German customer.

For more information about this see the manual covering the place of supply of goods (VATPOSG).