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Markel Tax

03 Feb 2020

VAT on goods sold to EU businesses

Question: As a UK VAT registered business I understand that when my client sells new furniture from the UK to another EU member state on a “Business to Business” basis, it can Zero Rate (ZR) the sales concerned. Are there any conditions for this ZR to apply?

Answer: If furniture is sold by your client from UK held stock, it will be subject to UK VAT (unless *distance selling applies); however, this will be 0% (ZR) UK VAT as long as it meets all of the conditions explained in Notice 725 sections 3 to 5. These are:

1. The goods concerned are transported from the UK to another of the 27 EU member states;
2. Sufficient evidence of removal is obtained within 3 or 6 months of the time of supply (sections 4.4 and 5);
3. The (immediate) customer is VAT registered in another EU member state. Its VAT number does not have to be for the country the goods are being sent to, but must be effective at the time of sale. This can be checked by going on the Europa VIES website (sections 4.7 to 4.12);
4. The customer’s EU VAT number, including the 2 letter country prefix code, is shown on the sales invoice issued; and
5. From the 1st January 2020, the sale must also be included on the relevant EC sales list (these have to be completed at least each calendar quarter).

If any one of these conditions are NOT MET, the supplier concerned should charge UK VAT at the appropriate rate, which for furniture would be the Standard Rate (currently 20%) in the same way as a Business to Consumer supply (subject to breaching the *distance selling threshold - section 6). This VAT should be accounted for on the VAT return covering when the sale occurred. If, subsequent to the SR sale, the ZR conditions are met (e.g. the customer gets a back-dated VAT registration and gives the seller the details, or the seller didn’t do the ECSL at the appropriate time but corrects this retrospectively), the VAT charged and accounted for can be reduced to ZR at that time (but not before). 

It should also be remembered that businesses who make intra-community supplies of goods should have a sales invoice that quotes something to explain the zero-rating, for example “zero-rated intra-community dispatch”. If the level of EC dispatches made  by a UK business exceed £35k (excl. VAT) in the current or 4 previous quarters, will need to complete monthly EC sales lists. Finally if the value of EC dispatches exceeds £250k in a calendar year then there will be a need to complete a supplementary Intrastat declaration monthly.

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Tagged Value added tax (VAT) services Value Added Tax (VAT) services