VATSC02105 - Basic principles and underlying law: Scope of VAT: Introduction
The scope of VAT is defined in Section 4(1) of the VAT Act 1994:
VAT shall be charged on any supply of goods or services made in the United Kingdom, where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him
A transaction is within the scope of UK VAT if the following four conditions are met:
- it is a supply of goods or services
- it takes place in the UK
- it is made by a taxable person (someone who is, or is required to be registered)
- It is made in the course or furtherance of any business carried on or to be carried on by that person.
To decide whether a transaction is within the scope of UK VAT, you should be satisfied that it meets all these conditions.
It is essential that you confirm that a transaction falls within the scope of VAT before moving to second-level questions of either mechanics, for example time of supply, input tax etc, or liability.
When a transaction does not meet all of the conditions that is the transaction:
- is neither a supply of goods or services
- does not take place in the UK
- is not made by a taxable person, or
- is not made in the course or furtherance of business
it is outside the scope of UK VAT.