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HMRC internal manual

VAT Supply and Consideration

From
HM Revenue & Customs
Updated
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Basic principles and underlying law: Scope of VAT

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.