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HMRC internal manual

VAT Single Market

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HM Revenue & Customs
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Simplifications: triangulation: other chain transactions

Introduction

Triangulation only occurs where there are three parties. However, chain transactions, in which goods are delivered directly from the first supplier in one Member State to the final customer in another Member State, can involve more than three parties. In these circumstances the intermediate suppliers incur a liability to register for VAT - normally in the Member State of destination. This is because the place of supply of goods is determined by the location of the goods when supplied (see the manual covering the place of supply of goods (VATPOSG)). This can lead to their making supplies in a Member State where they have no physical presence.

This is illustrated in the example below where Belgian Co (B Co) orders goods from UK Co (2), who itself orders the goods from UK CO (1) . UK Co (1) in turn orders the goods from French Co (F Co) with instructions that the goods be delivered directly to Belgium.

Use this link to view a diagram showing orders described above

VAT treatment

There are three supplies of goods

  • F Co to UK Co (1)
  • UK Co (1) to UK Co (2) and
  • UK Co (2) to B Co

but only one intra-EC movement of the goods.

F Co might zero-rate their supply against UK Co (1)’s VAT number. As a result UK Co (1) will be making an acquisition albeit in Belgium as that is where the transport of the goods ends. (However, if UK Co (1) fails to account for acquisition VAT in Belgium there will be an acquisition in the UK under the procedure described at VATSM3350).

UK Co (1)’s supply to UK Co (2) and its supply to B Co will both take place in Belgium (as that is where the goods are located) and so will be subject to Belgian VAT. UK Co (1) and UK Co (2) are therefore both liable to register for VAT in Belgium.

Limited simplification

There is no simplified procedure for chain transactions involving four or more parties. However, it may be possible in some circumstances to apply the triangulation simplification to part of the chain. In the above example, this would be possible if either UK Co (1) was registered in France or UK Co (2) was registered in Belgium.

UK Co (1) registered in France

Use this link to view diagram for company registered in France

In this scenario F Co will make a domestic supply of goods to UK Co (1) in France. UK Co (1) will reclaim the VAT charged by French Co as their input tax via their French registration. The triangulation simplification can then be adopted by UK Co (1), UK Co (2) and B Co with B Co accounting for VAT as a reverse charge in Belgium (see VATSM5235). This avoids the need for UK Co (2) to register in either France or Belgium.

UK Co (2) registered in Belgium

Use this link to see diagram for company registered in Belgium

Here UK Co (2) is registered for VAT in Belgium. F Co, UK Co (1) and UK Co (2) may therefore apply the triangulation simplification arrangements (see VATSM5235). As a result UK Co (2) will account for VAT as a reverse charge in Belgium. The supply by UK Co (2) to B Co will become a domestic supply in Belgium. Again one of the UK companies (this time UK Co (1)) avoids the need to register in either France or Belgium.