VATPOSG3510 - Main rules: distance selling: meaning of the term "distance selling"

From 1 January 2021 sections 7(4) and 7(4) were removed from UK law as they related to distance sales from EU member States to customers in Great Britain (England, Scotland and Wales) (7(4)) and distance sales from Great Britain to customers in EU Member States (7(5)). However, the distance selling rules still apply to businesses moving goods from Northern Ireland to the EU and vice versa. The relevant UK legislation applying to these businesses is now contained in Para 29 Schedule 9ZB VAT Act. For more information on distance sales from Northern Ireland, see VATNIEU.

Distance selling is the term used to describes supplies of delivered goods between EU member States and from Northern Ireland to a person in an EU member State (and vice versa) where

  • the customer is not registered for VAT, and
  • delivery is by or under the directions of the supplier of the goods.

Guidance in VATPOSG3540 explains what is meant by delivered goods.

The recipients of distance sales will mainly be private individuals, but they can also include small unregistered businesses, businesses making only exempt supplies, charities and public bodies.

The rules are intended to combat distortion of trade and unfair competition by transferring the place of supply to the country in which the customer receives the goods. Without this, cross-border supplies to private individuals would be subject to VAT in the country of dispatch as a domestic supply. With the variations in VAT rates between countries this could encourage businesses selling mainly to private individuals (for example mail order companies) to relocate their businesses to the country with the lowest rates of domestic VAT.

New means of transport are excluded from these arrangements. Consequently, the place of supply for supplies of new motor vehicles, boats and aircraft remains the country of dispatch, regardless of the status of the customer.

Nevertheless, special arrangements apply for taxation in the country of arrival and you can find further details about this in the guidance covering New means of transport (VATNINMT) and Notice 728 (Account for VAT on a new means of transport).

Distance selling is also covered in VATNIEU and registration, and Notices 700/1 (Should I be registered for VAT?) and 725 (VAT on movements of goods between Northern Ireland and the EU).