When does VAT apply?
When does VAT apply?

The following Tax guidance note provides comprehensive and up to date legal information covering:

  • When does VAT apply?
  • A supply of goods or a supply of services
  • A taxable supply
  • Made in the UK
  • Taxable person
  • The course or furtherance of business

A transaction must have five elements for UK VAT to be chargeable. It must:

  1. be a supply of goods or a supply of services

  2. be a taxable supply

  3. take place in the UK

  4. be made by a taxable person, and

  5. be made in the course or furtherance of any business carried on by that person

This Practice Note explains what each of those five elements means.

This Practice Note does not cover importation of goods or the circumstances where a UK person may be required to pay UK VAT on the supply of services from abroad, ie the reverse charge, for which see Practice Notes: VAT—the reverse charge on cross-border supplies and Importing goods from outside the EU.

A supply of goods or a supply of services

The first element has three parts. A transaction must:

  1. be a ‘supply’

  2. be categorised as either a ‘supply of goods’ or a ‘supply of services’, and

  3. not be specifically excluded from being a supply

Supply

The term ‘supply’:

  1. includes ‘all forms of supply’, but

  2. excludes anything done ‘otherwise than for a consideration’

HMRC provides some guidance:

'…a supply may be effected by selling something, by hiring or renting something or by someone doing something for someone else (a service).'

There have been a number of cases where the question of whether something is a supply was relevant. They do