HMRC has updated its Guidance Check if you need to register as a digital platform operator.
This guidance now includes various examples of what may qualify as a digital platform.
Tag Archives: place-of-supply
VAT: Consignment and call-off stock
VAT basics
Consignment, call-off stock, and sale or return goods
If a business is required to provide regular sales of goods to customers, a prudent business structure is to keep inventory in a warehouse near the customer, or which belongs to the customer. This is likely to reduce transport costs and provides quicker access to the goods thus reducing time in the supply chain. There are specific VAT rules for businesses which hold stock in foreign countries. They stipulate when, and what VAT should be charged, and if a business needs to VAT register as a non-resident trader in another country in which it is warehousing its goods.
Below we consider what the terms mean, the differences and the VAT treatment applicable.
Differences
There is often confusion over the terms; consignment and call-off stock, and they are sometimes used interchangeably. They are differentiated based on who controls access to, and use of, the goods. The difference determines the VAT requirements and compliance rules, so it is important to identify the actual arrangements a business has in place, or plan for the most beneficial outcome. Both of these measures involve the transfer of a business’ own goods – for the purposes of this article; cross-border. The transfer of goods within the same legal entity from one country to another is a deemed supply. This fact is sometimes missed, which can lead to problems. The VAT rules differ from country to country and create legal uncertainty for businesses.
In summary
- Consignment stock
Consignment stocks are created when a business transfers its own goods to another Member State to create a stock over which it has control and from which it makes supplies. Typically, there are multiple potential customers for consignment stock.
Note: Goods sent to an overseas customer on sale or return are treated in the same way as consignment stocks.
- Call-off stock
Call-off stock is the transfer of goods by a business from one Member State to another to create a stock of goods from which its customers can ‘call-off’ ie; use and pay for the goods as and when they require them.
Not call-off stock
Goods delivered to storage facilities operated by the supplier, rather than the customer, should be treated as consignment stocks (see above). If stocks of goods are dispatched by a supplier for call-off by more than one customer, this is also likely to be consignment stock.
VAT treatment
Consignment stock
There is an initial deemed supply of own goods to form the stock which takes place in the country from which the goods are originally shipped. This is usually VAT free as a dispatch and the usual documentary requirements apply.
The place of subsequent supplies of the goods, once a buyer has been found (change of ownership) is usually the country in which the stock is held.
Because the business is transferring its own goods “to itself” in another country it will be making an acquisition of goods in that country. The business is likely to be liable to register for VAT there (or appoint a fiscal representative in the country of arrival) and be responsible for import obligations in the other country. Output tax will also be due (at the rate of VAT applicable in the country in which the goods are located) on the sale to a third party.
Consignment stock – reporting requirements
If a UK VAT registered business transfers goods to another country to create a consignment stock it must complete box 6 on the VAT return reporting a value based on the cost of the goods – see HMRC Public Notice 725.
Call-off stock
As the customer has control of the goods in storage, is aware of stock movements, and may take stock whenever he requires this does not generally require the seller to VAT register in the foreign country as a non-resident trader. Such sales are treated as a “regular’ export and the seller is required to show the customer’s VAT number etc on invoices and other documentation in order to treat it as VAT free in the usual way. The time of supply for these supplies is the date the goods are called off by the customer.
Call-off stock – reporting requirements
The supply of call-off stock from the UK to a VAT registered business in another country is VAT free (subject to the normal rules). Box 6 of the VAT return should be completed using a value based on the cost of the goods as above.
VAT: Where do I belong?
A VAT did you know?
Around 50% of businesses do not recover VAT incurred overseas and there is an estimated $5 billion not reclaimed each year.
VAT Grouping: Protection of the Revenue
HMRC has updated VAT Notice 700/2 – Group and divisional registration.
The salient amendments are to the references to ‘protection of the revenue’ and ‘Revenue loss’.
VAT grouping is a facilitation measure by which two or more entities can be treated as a single taxable person (a single VAT registration) for VAT purposes. The measure was once restricted to “Bodies Corporate” which includes; companies of all types and limited liability partnerships. However, from 1 November 2019, grouping is additionally available for all entities, including; partnerships, sole traders and Trusts in certain cases.
HMRC has the vires to refuse an application for a VAT group, or remove a member if HMRC consider that it may lead to a VAT loss.
The Change
“The definition of ‘protection of the revenue’
Where this is considered necessary for the protection of the revenue, the VAT grouping legislation gives HMRC the power to:
- prevent a person joining a VAT group
- remove an existing member from a VAT group
We usually will not use our protection of the revenue powers if the revenue loss follows from the normal operation of grouping. If we feel that the revenue loss does not follow the normal operation of grouping, then we would consider using our protection of the revenue powers, such as:
- where we identify enhanced risks to the collection of revenue
- the use of VAT avoidance and distortion in the liability of the group’s supplies
In this context, ‘revenue loss’ means the VAT that is not charged when one company in a group sells to another company in the same group. This usually happens when one or more companies in the VAT group cannot reclaim all the VAT they pay because they make supplies that are exempt from VAT.
We will use our revenue protection powers if it looks like the main reason for VAT grouping someone is to ignore supplies from that company’s overseas branches to other members of the VAT group.
This applies whether that person is established in the UK or has a UK fixed establishment”.
VAT and the 2025 Budget
Budget 26 November 2025
There was not too much excitement in the budget for indirect taxes (there was no change to the registration threshold, nor any VAT rates), but there were some minor changes.
VAT Grouping
The rules relating to cross border VAT grouping will be clarified. From the Budget date of 26 November 2025′ the UK will revert to its previous position on grouping to restore the “whole establishment” principle. HMRC also published Revenue and Customs Brief 7 (2025): Revised VAT grouping rules and the Skandia judgment, confirming that HMRC now considers that an overseas establishment of a business VAT grouped in the UK should be treated as part of that VAT group, even when located in an EU member state that does not operate whole entity VAT grouping.
This means that services provided between a UK head office and its overseas branch will once again be disregarded for VAT purposes, even if the branch belongs to a VAT group in another jurisdiction.
HMRC acknowledges that some VAT groups may have accounted for VAT in line with the previous guidance and may now be eligible to reclaim overpaid VAT through the error correction notification procedure.
This HMRC brief provides more details.
Private hire vehicles
Suppliers of private hire vehicle and taxi services will be excluded from the scope of the Tour Operators’ Margin Scheme (TOMS) from 2 January 2026, except where these are supplied in conjunction with certain other travel services. The government also published a response to the Consultation on the VAT Treatment of Private Hire Vehicles and HMRC published Revenue and Customs Brief 8 (2025): VAT Tour Operators’ Margin Scheme — supplies by private hire vehicle or taxi operators, which explains how to account for VAT as a private hire vehicle operator, a taxi operator, or business re-selling such supplies.
E-invoicing
The government will require all VAT invoices to be issued in a specified electronic format from April 2029. An implementation roadmap will be published at Budget 2026 further to consultation with businesses.
VAT treatment of business donations of goods to charity
There will be a new VAT relief to be be introduced on 1 April 2026 for business donations of goods to charity for distribution to those in need or use in the delivery of their charitable services, ie; in addition to goods donated for sale. HMRC also published a response to the Consultation on the VAT treatment of business donations of goods to charity, and a policy paper, VAT relief for business donations on goods to charities. The relief will apply to goods valued up to £100 per item, with a higher £200 threshold for essential electrical items to help tackle digital poverty. Eligibility is strictly limited to registered charities, meaning community interest companies (CICs) and social enterprises are excluded unless they register as charities. This corrects an anomaly where there is no VAT liability when businesses dispose of goods to landfill, but may incur one when donating those same goods to charity.
Motability
From 1 July 2026, vehicles leased through the Motability Scheme will be subject to 20% VAT on top-up payments for more expensive vehicles which are made in addition to the transfer of eligible welfare payments for more expensive vehicles on the scheme. The standard rate of Insurance Premium Tax will apply to scheme insurance contracts: VAT and Insurance Premium Tax: change to reliefs for qualifying motor vehicle leasing schemes – GOV.UK There will be no changes to vehicles designed for, or substantially and permanently adapted for, wheelchair or stretcher users.
ATCS
The Government has confirmed that the ‘Advance Tax Certainty Service’ (ATCS) will launch in July 2026 and provide clearances on corporation tax, stamp taxes, VAT, PAYE and the construction industry scheme, where there is no existing statutory route to certainty.
Who can claim import VAT? The TSI Instruments case
Latest from the courts
In the First-tier Tribunal (FTT) case of TSI Instruments Limited the issue was whether the appellant could claim import VAT when it was not the owner of the imported goods. The amount of VAT at stake was circa £8.5 million.
Background
TSI Instruments (TSI) imported scientific equipment owned by its customers for repair. The main activity of TSI in the UK is the service, repair and calibration of TSI Group goods which had previously been sold to customers around the world.
TSI is named as the importer and paid the charges made by the shipping company for dealing with the declaration and customs clearance formalities on behalf of TSI as well as paying the import VAT which it claimed.
Contentions
HMRC refused to repay the claims on the basis that only the entity with title to the goods is able to deduct the import VAT.
The appellant argued there is no requirement in the legislation that the importer should be the owner of the goods in order for import VAT to be credited. TSI asserted that, as long as the goods are imported for the purposes of its taxable business and it bears the costs of the import, the import VAT can be credited as input tax.
Decision
The FTT ruled that TSI was not entitled to claim input VAT credit for import VAT paid on goods it did not own, and the appeal was dismissed. Via both EU and UK VAT law, the right to deduct import VAT is restricted to the actual owner of the goods or the entity which has the right to dispose of the goods as their owner (or where the cost or value of the goods is reflected in the price of specific output transactions or in the price of goods and services supplied in the course of their economic activities). Since TSI did not own the goods, and their value was not included in the repair service price, the FTT ruled against TSI.
Commentary
This position could have been avoided by planning being put in place. TSI could have used Inward Processing Relief or the owner of the goods could have been the importer.
Legislation/HMRC guidance
VIT13300 – Import VAT may only be claimed by the owner of the goods who would be entitled to reclaim the import VAT either in accordance with s24 VATA 1994 (if registered for VAT in the UK) or under part XXI of the VAT Regulations 1995 (SI 1995/2518) if they are not registered for VAT in the UK, provided they satisfy the legislative conditions. For further information see Notice 723A.
HMRC published Revenue and Customs Briefs 2 (2019) and Brief 15 (2020) which restated HMRC’s long-standing policy that it is the owner of the imported goods who is entitled to recover the import VAT under current UK legislation. These Briefs clarify, but do not change, HMRC’s policy.
Common VAT mistakes
VAT basics
None of us are perfect, and any business can make mistakes with VAT despite all intentions to take reasonable care. So what are the most common errors? Here’s a list of pitfalls to avoid:
Wrong rate of output tax charged
- The default position is that a supply is standard rated unless it is specifically reduced rated, zero-rated, exempt or outside the scope of UK VAT
Land and property transactions
- Misunderstanding the correct VAT treatment of a land and property transactions
- Not recognising VAT issues
- Issues with the Option To Tax
- TOGC issues
- A guide to triggerpoints here
Cross-border issues
- Failing to meet the requirements to zero-rate exports
- Incorrect import procedures
- Ignoring the reverse charge
Inter-company charges
- Misunderstanding the VAT treatment of management charges
Partial exemption
- Not recognising partial exemption
- Using an inappropriate method
- Failing to carry out the annual adjustment
- Failing to make Capital Goods Scheme adjustments
Business entertainment
- Different rules apply to the recovery of input tax on entertaining depending on the type of recipient, eg: clients, contacts, staff, partners and directors depending on the circumstances
Registration
- Late registration
- Exception from registration
- Misunderstanding pre-registration issues
- Failing to appreciate voluntary registration
- Deregistration issues
VAT groups
- Failing to VAT group when beneficial or failing to disband
- Recovery of input tax
- Timing of transactions
- Partial exemption issues
Tax points (Time Of Supply)
- Failing to recognise a tax point for output tax
- Incorrect treatment of deposits
- Incorrect treatment of forfeit deposits
- Recovery of input tax at incorrect time
Bad Debt Relief issues
- Failing to claim Bad Debt Relief
- Failing to repay a claim to HMRC when payment from customer is received
- Failing to repay input tax when a supplier is not paid (after six months)
Overseas issues
- Not recognising indirect tax obligations outside GB
- Not recovering VAT incurred overseas
- Place of supply misunderstandings
Claiming input tax without the correct documentation
- A guide to alternative evidence here
Recovering irreclaimable input tax
- A guide to what VAT is not claimable here
Return errors
- A box-by-box guide here
Business promotion schemes
- Incorrect treatment of vouchers, gifts and discounts
Composite or separate supplies
- Treating a composite supply as individual supplies, or vice-versa
Changes to a business
- Selling new products, acquisitions, share sales, disposals, re-structuring, and ceasing to trade can all have a VAT impact and this can be missed
Fuel and motoring costs
- Not applying Road Fuel Scale Charges correctly
- Incorrect input tax recovery on vehicle purchases/leases/repairs etc
Special schemes
- Failure to use the most suitable alternative schemes for accounting for VAT
One-off transactions
- Failing to recognise VAT issues of unusual or one-off transactions
Non-business (NB) and charitable activities
- Failure to recognise NB activities
- Failure to restrict input tax in connection with NB activities
Errors can lead to draconian penalties, and ignorance is not a defence.
A guide to VAT triggerpoints here .
VAT – A beginner’s practical guide
VAT Basics
I am often asked if there is a VAT beginner’s guide, I find HMRC guidance generally unhelpful for someone without a tax background, so, here is all the basic information you may need in one place.
What is VAT?
Value Added Tax (VAT) is a tax charged on most business transactions made in the UK. It is charged on goods and services and is an ad valorem tax, which means it is proportionate to the value of the supply made.
All goods and services that are VAT rated (at any rate including zero) are called “taxable supplies”. VAT must be charged on taxable supplies from the date a business first needs to be registered. The value of these supplies is called the “taxable turnover”.
Exempt items
VAT does not apply to certain services because the law says these are exempt from VAT. These include some; financial services, property transactions, insurance education and healthcare. Supplies that are exempt from VAT do not form part of the taxable turnover.
The VAT rates
There are currently three rates of VAT in the UK:
- 20% (standard rate) – Most items are standard rate unless they are specifically included in the lower rate categories.
- 5% (reduced rate) – this applies to applies to certain items such as domestic fuel and power, installation of energy-saving materials, sanitary hygiene products and children’s car seats.
- 0% (zero rate) – applies to specified items such as food, books and newspapers, children’s clothing, exports, new houses and public transport.
VAT registration
A business is required to register for, and charge VAT, if:
- the taxable turnover reaches or is likely to reach a set limit, known as the VAT registration threshold
- a VAT registered business has been acquired as a going concern (TOGC)
- potentially; goods or services have been purchased VAT free from non-UK countries (a self-supply)
Registration limit
The current VAT registration threshold is £90,000. If at the end of any month the value of taxable supplies made in the past twelve months is more than this figure a business MUST VAT register. A business can opt to register for VAT if its taxable turnover is less than this. Please note that taxable turnover is the amount of income received by a business and not just profit. If a business does not register at the correct time it will be fined.
Future test
Additionally, if, at any time there are reasonable grounds to expect that the value of the taxable supplies will be more than the threshold in the next thirty days alone a business must register immediately.
What are the exceptions?
VAT is not chargeable on:
- taxable supplies made by a business which is not, and is not required to be, registered for VAT
- zero rated supplies
- supplies deemed to be made outside the UK
- exempt supplies
What if a business only makes exempt or zero-rated supplies?
Exempt
If a business only makes exempt supplies, it cannot be registered for VAT. If a business is registered for VAT and makes some exempt supplies, it may not be able to reclaim all of its input tax.
Zero-rated
If a business only supplies goods or services which are zero-rated, it does not have to register for VAT, but, it may do so if it chooses – this is usually beneficial.
What is input tax and output tax?
Input tax is the VAT a business pays to its suppliers for goods and services. It is VAT on goods or services coming into a business. In most cases, input tax is the VAT that registered businesses can reclaim (offset against output tax).
Output tax is the term used to describe the VAT charged on a business’ sales of goods or services. Output tax is the VAT a business collects from its customers on each sale it makes.
A full guide to VAT jargon here
Is there anything that will make VAT simpler for a small business?
There are a number of simplified arrangements to make VAT accounting easier for small businesses. These are:
- Cash Accounting Scheme
- Annual Accounting Scheme
- Flat Rate Scheme
- Margin schemes for second-hand goods
- Global Accounting
- VAT schemes for retailers
- Tour Operators’ Margin Scheme
- Bad Debt Relief
Details may be found here and here and here.
VAT calculation
- A business adds VAT to the value of sales it makes to other businesses or customers
- The VAT amount is reached by multiplying the sale amount by the VAT rate percentage, then adding that to the value of the sale.
- The total of the VAT on sales for a VAT period is output tax
- For a VAT period, a business will total all VAT it has been charged by suppliers (eg; stock, repairs, rent, and general business expenses etc) – this is input tax.
- On the VAT return for the period, the amount payable or reclaimable to HMRC is the output tax less input tax.
Records
A business must keep complete, up-to-date records that enable it to calculate the correct amount of VAT to declare on its returns. VAT records must be kept for at least six years, because a business will need to show them to HMRC when asked.
It is acceptable for ordinary business records to be the basis for VAT accounts. A business will need records of sales and purchases (and any adjustments such as credit notes) including details of how much VAT the business charged or paid. If trading internationally, records of imports and exports/dispatches and acquisitions with all overseas territories, including the EU must be recorded. VAT records must show details of any supplies a business has given away or taken for personal use.
VAT records must also include all invoices you have received and issued. Invoice requirements here
Records will also need to include a VAT account, showing how total input tax and output tax has been calculated to include in your VAT returns.
It is vital to ensure that the VAT records are accurate. Failure to do so can lead to significant tax penalties
MTD
For certain business, the new MTD rules apply and certain software must be used. Details here
Time of supply (tax point)
It is important to establish the time VAT is due. Full details here
VAT returns
A VAT registered business must submit returns on a regular basis (usually quarterly or monthly). A VAT return summarises a business’ sales and purchases and the VAT relating to them. All the information a business requires must be in its VAT records, specifically a VAT account.
Return requirements include:
- sales total (excluding VAT)
- output tax – this also includes VAT due on any other taxable transactions, eg; barters, non-monetary consideration, goods taken for personal use
- value of purchases (excluding VAT)
- input tax claimable
- total of VAT payable/claimable
A box by box guide to returns here.
Online VAT returns are due one month and seven days after the end of the VAT period. Payment of any VAT owed is due at the same time, although HMRC will collect direct debit payments three days later.
VAT & Import Duty
HMRC has updated its Guidance on How to claim a repayment of import duty and VAT if you have overpaid
It sets out how to check time limits and how to claim for importers, agents, freight forwarders or express operators. It also explains how to use the Customs Declaration Service or form C285 as an individual.
It covers:
- who can apply
- when to apply
- how to apply
- what you need — Customs Declaration Service
- apply online — Customs Declaration Service
- what you will need — C285 form
- apply online — C285 form
- what happens after the application