Scope and legal basis of VAT: Background - the scope of VAT
The scope of VAT on taxable supplies is defined in Section 4(1) of the VAT ACT 1994 as follows.
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 therefore 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
- It is made in the course or furtherance of any business carried on or to be carried on by that person.
Books of guidance deal with the four conditions above as follows
- VATSC will help you to decide whether a supply has taken place.
- VATPOSG, VATPOSS and VATPOSTR will help you to decide whether that supply was made in the United Kingdom.
- VTAXPER (this guidance) will help you to determine who made that supply, and whether the supplier was a taxable person.
- V1-6 VAT: Business/non-business will help you to decide whether the supply was made in the course of the supplier’s business.
If, after having consulted these books, you conclude that all four conditions are met, the supply is within the scope of UK VAT. It is only at that stage that you should move on to consider further issues such as the liability of the supply, the time of supply and input tax.