Changes to VAT for intra-EU chain transactions and zero-rated goods
17 February 2020: HMRC has published guidance regarding changes to the VAT treatment of chain transactions where the goods are transported across an EU border.
The guidance sets out how the supply that is to be treated as the cross-border supply is to be identified, including the place of supply of the goods before and after that cross-border supply.
The amendment to Regulation 134 clarifies the conditions necessary to be met before a supply across an EU border can be zero-rated.
In addition to these changes to the UK law there are some EU regulations that have direct effect. These set out the evidence that must be held to show the goods have been moved across an EU border.
HMRC’s guidance also sets out its view on the practical application of the EU regulations. In particular, the new rules add additional formal conditions, so that for an intracommunity supply of goods to be zero-rated:
- the customer must be VAT registered in a member state other than the member state of origin;
- the customer must provide the supplier with that VAT number; and
- the supply must be reported on an EC Sales List.
In addition, Article 45a of Council Implementing Regulation 282/2011 sets out a list of documentary evidence and conditions whereby it can be presumed that the goods have been transported across an EU border.
As the Implementing Regulation is directly applicable, no further legislation was required to implement it into UK law and it has applied since 1 January 2020.
Previous requirements for evidence of removal
Notice 725, paragraph 4.3 (which has force of law) includes a requirement that you get and keep valid commercial evidence that the goods have been removed from the UK within the time limits set out at paragraph 4.4.
Notice 725, section 5 sets out a list of documents, a combination of which must be used to provide clear evidence that a supply has taken place and that the goods have been removed from the UK. The responsibility is on the business to prove to HMRC that the conditions have been met.
HMRC states that businesses which have difficulty gathering the information required by the new rules can continue to rely on these rules.
New simplification rules
The effect of the new rules is that, where certain conditions are met, it is presumed that the goods have been transported from the member state of origin. This presumption can be challenged by HMRC. If the relevant conditions are met, it is for HMRC to prove that the goods have not been transported from the member state of origin.
Article 45a of Council Implementing Regulation 282/2011 sets out the conditions under which the goods can be presumed to have been removed.
The presumptions are met where the supplier confirms the dispatch or transport which was issued by two different parties that are independent of each other, of the vendor and of the acquirer and is in possession of one of the following:
- At least two items of non-contradictory acceptable evidence from list A (see below).
- Any single item from list A together with any single item of non-contradictory acceptable evidence from list B (see below).
In addition, where the acquirer arranges the transport of the goods, the supplier must be in possession of a written statement from the acquirer, stating that the goods have been dispatched or transported by the acquirer, or by a third party on behalf of the acquirer, and identifying the destination member state of the goods.
That written statement should state:
- the date of issue;
- the name and address of the acquirer;
- the quantity and nature of the goods;
- the date and place of the arrival of the goods;
- in the case of the supply of means of transport, the identification number of the means of transport; and the identification of the individual accepting the goods on behalf of the acquirer.
The statement must be provided by the 10th day of the month following the supply.
Acceptable evidence
| List A | List B |
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Documents relating to the dispatch or transport of the goods, such as: • a signed CMR document or note; |
The following documents: • An insurance policy with regard to the dispatch or transport of the goods or bank documents proving payment for the dispatch or transport of the goods. |