VBNB47240 - Specific issues: movement of own goods: accounting for VAT: worked examples

Example 1 – Own goods used for business and non-business purposes

A business moves its own goods that it uses in GB for both business and non-business activities to NI. The net value of the goods was £200. £40 import VAT is incurred on this movement.

The business can only recover 50% of its input tax (£20) incurred in GB because 50% is subject to non-business use. The business accounts for £40 on the movement into NI as output tax on its return, it can also recover £20 of this VAT as 50% relates to business activity. As the business can also reclassify the original supply to fully taxable business use, it can also recover the £20 VAT that it did not claim on the original supply.

The net result is, £40 is accounted for as output tax (on the movement from GB to NI) and £40 is reclaimed as input tax (£20 relates to 50% of the import VAT charged on the movement from GB to NI and £20 from reclassification of the original supply to fully taxable), resulting in a nil net effect.

Example 2 – Own goods used solely for non-business purposes

An organisation (public body) moves its own goods that it uses in GB for solely non-business purposes to NI. The net value of the goods was £200. £40 VAT is accounted for as output tax on this movement.

The business could not recover any of the VAT incurred in GB on the original supply because the goods are for non-business use.

The business accounts for £40 on the movement into NI as output tax on its return. It cannot recover the import VAT of £40 as the goods are used for a non-business purpose. However, it can now reclassify the original supply as being attributable to a taxable supply, meaning that it can recover the £40 VAT charged on that supply as input VAT in the same period.

The net result is, £40 is accounted for as output tax (on the movement from GB to NI) and £40 is reclaimed as input tax (from reclassification of the original supply) resulting in a nil net effect.