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HMRC internal manual

VAT Small and Medium Enterprises Assurance Manual

Checks on zero rating and outside the scope for outputs: supplies of goods in warehouses and free zones

Supplies of imported goods in customs and / or excise warehouse are “disregarded” for tax purposes. The import VAT is suspended and collected when the goods leave the warehousing regime. Supplies of UK products in excise warehouses are disregarded except for the supply before the goods are removed from the warehouse. VAT is paid on that supply at the time the excise duty is due. You will find further guidance in V1-19 Warehouses and free zones Chapter 2 Section 1.

Supplies of goods in free zones are normally taxable in the same way as other normal supplies in the UK (see V1-19 Appendix H). However, an extra-statutory class concession provides for zero rating of the last supply before the goods are removed, provided the buyer enters a contractual arrangement to pay the import VAT due on removal of the goods from the free zone.

Check that traders are correctly applying the rules for “disregarding” supplies of goods in warehouse and for zero-rating the final supply of goods in free zones.