V16.897 VAT—changes to the place of supply of natural gas and electricity
Information Sheet 10/04, December 2004
This Information Sheet explains changes to the place of supply of natural gas and electricity, and other related changes, which take effect from 1 January 2005.
1.1 What is this Information Sheet about?
This Information Sheet explains various changes to the VAT treatment of supplies of natural gas and electricity from 1 January 2005. The main impact is on the place of supply, but there are other related changes. These include the introduction of a reverse charge mechanism for supplies to VAT registered customers where the supplier is located outside the UK and also changes to the place of supply of the provision of services associated with natural gas and electricity distribution systems.
1.2 Who is affected by these changes?
For supplies of natural gas and electricity (including wholesale supplies) the changes potentially affect suppliers, importers and VAT-registered customers. Providers and VAT-registered users of services comprising access to, and use of, gas and electricity distribution networks may also be affected.
1.3 Why are these changes necessary?
They are intended to modernise and simplify the VAT rules for cross-border supplies of natural gas and electricity. Until now, they have been treated in the same way as other supplies of goods and taxed in the place where despatch or transport to the customer commences. However, these normal place of supply rules create problems because supplies of natural gas and electricity are normally transmitted through networks or grids linked together by inter-connectors