VSWB1030 - The law
EU law
This law ceased to apply in Great Britain from 1 January 2021 but remains the basis for the rules that apply in Northern Ireland.
Council VAT Directive 2006/112/EC (known as the Principal VAT Directive) is a recast of the EC Sixth VAT Directive, and became law on 1 January 2007.
Article 146(1)(b) - formerly Article 15(2) of the Sixth Directive - provides the legal basis for the zero-rating of goods exported by or on behalf of a purchaser not established in the supplier’s country.
146(1) Member States shall exempt the following transactions:
(b) the supply of goods dispatched or transported to a destination outside the Community by or on behalf of a customer not established within their respective territory, with the exception of goods transported by the customer himself for the equipping, fuelling and provisioning of pleasure boats and private aircraft or any other means of transport for private use;
UK primary law
Section 30(8) of the VAT Act 1994 permits the zero-rating of goods supplied for export subject to compliance with conditions imposed in regulations or elsewhere.
Section 30(10) of the VAT Act 1994 permits the Commissioners to demand payment of any VAT on goods supplied in Northern Ireland or Great Britain and zero-rated for export where:
- goods supplied for export have not been exported, or
- relevant conditions for zero-rating the supply have not been met.
The goods may also be liable to forfeiture.
30(10) Where the supply of any goods has been zero-rated by virtue of subsection (6) above or in pursuance of regulations made under subsection (8) or (9) above and–
(a)the goods are found in the United Kingdom after the date on which they were alleged to have been or were to be exported or shipped; or
(b)any condition specified in the relevant regulations under subsection (6), (8) or (9) above or imposed by the Commissioners is not complied with,
and the presence of the goods in the United Kingdom after that date or the non-observance of the condition has not been authorised for the purposes of this subsection by the Commissioners, the goods shall be liable to forfeiture under the Management Act and the VAT that would have been chargeable on the supply but for the zero-rating shall become payable forthwith by the person to whom the goods were supplied or by any person in whose possession the goods are found in the United Kingdom; but the Commissioners may, if they think fit, waive payment of the whole or part of that VAT.
Schedule 9ZB, paragraph 12 of the VAT Act 1994 extends the application of Section 30(10) to supplies zero-rated as exports from Great Britain to Northern Ireland and vice versa.
12(1) Where a supply of goods has been zero-rated under paragraph 3(1), or as a result of regulations under section 30(8), on the basis that the goods have been or are to be removed from Northern Ireland to Great Britain, section 30(10) (forfeiture of goods found in the United Kingdom) applies in relation to that supply as if any reference to the United Kingdom were to Northern Ireland.
12(2) Where a supply of goods has been zero-rated under paragraph 3(1) or 31A(3), or as a result of regulations under section 30(8), on the basis that the goods have been or are to be removed from Great Britain to Northern Ireland, section 30(10) applies in relation to that supply as if any reference to the United Kingdom were to Great Britain.
Guidance in VEXP90900 gives further information on use of Section 30(10).
UK secondary law
The VAT Regulations 1995 (SI 1995/2518) provide conditions for zero-rating.
Regulation 129 outlines the conditions for zero-rating goods intended for export from Great Britain.
129(1) Where the Commissioners are satisfied that-
(a) goods intended for export to a place outside Great Britain have been supplied at a time when they were located in Great Britain to–
(i) a person not resident in Great Britain,
(ii) a trader who has no business establishment in Great Britain from which taxable supplies are made, or
(iii) an overseas authority, and
(b) the goods were exported to a place outside Great Britain, and
(c) the goods are not personal gifts on export as defined in regulation 2 of the Customs (Export) (EU Exit) Regulations 2019, and
(d)any conditions that may be specified by the Commissioners in a notice published by them have been met,
the supply, subject to such other conditions as they may impose, shall be zero-rated.
Regulation 133B outlines the conditions for zero-rating goods intended for export from Northern Ireland
133B Where the Commissioners are satisfied that–
(1) goods intended for export to a place outside the relevant states have been supplied at a time when they were located in Northern Ireland to–
(a) a person not resident in Northern Ireland,
(b) a trader who has no business establishment in Northern Ireland from which taxable supplies are made, or
(c) an overseas authority, and
(2) the goods were exported to a place outside the relevant states;
(3) the goods are not personal gifts on export as defined in regulation 9 of the Customs (Export) (EU Exit) Regulations 2019; and
(4) any conditions that may be specified by the Commissioners in a notice published by them have been met,
the supply, subject to such other conditions as they may impose, shall be zero-rated.
These regulations work in parallel and allow the Commissioners to impose further conditions. Those conditions are set out in VAT Notice 703/2 - Sailaway boats supplied for export outside the UK.
Tertiary law
VAT Notice 703/2 - Sailaway boats supplied for export outside the UK lays down the conditions that must be met in full for supplies made under the Sailaway Boat Scheme to be zero-rated. In this respect, parts of the notice have the force of law.