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Revenue & Customs Brief 20/11 announces a change in VAT treatment by which a business uses a UK VAT registration number (other than for triangulation purposes) to secure zero rating of goods sent from one EU member state to another, without arriving in the UK.
Under what is often referred to as the ‘fallback’ provision, use of a UK VAT registration number in these circumstances makes the customer liable to account for acquisition VAT in the UK. It does not cancel liability to account for acquisition VAT in the member state to which the goods are sent.
However, the UK VAT can be adjusted if VAT is accounted for correctly in the member state of arrival.
The change follows the European Court of Justice’s decision in the joined cases of X (C-536/08) and Facet BV (C-539/08). In each case, supplies of computer goods were sourced from member states other than the Netherlands and sent to customers located elsewhere in the EU.
Dutch VAT registration numbers were used to secure zero rating of the intra-EU supplies. The European Court of Justice held that there could be no right to deduct acquisition VAT where it falls due under the fallback arrangements as the goods did not actually enter the member state.
The decision clarifies what was previously an uncertain position. The liability to account for acquisition VAT where a UK VAT registration number is used in the course of an intra-EU supply of goods not involving removal to the UK remains unchanged.
However, it is now clear that there is no right to recover the acquisition VAT as input tax. The only basis on which the UK VAT may be adjusted is where it can be demonstrated that acquisition VAT has been accounted for in the member state of arrival.
Use of a UK VAT registration number as part of the triangulation simplification arrangements is unaffected.
With regard to the acquisition of yachts in the UK, as a result of the decision, the UK acquirer may no longer recover the UK acquisition VAT as input tax. The agreement in Business Brief 12/97 therefore ceases to have effect and will be withdrawn from 1 June 2011.
As a transitional measure, any UK VAT registered business which, before 1 June 2011, entered into a contract for the purchase of a yacht and intended to adopt the procedure as agreed in Business Brief 12/97, may continue to rely on those arrangements when the yacht is eventually delivered.
