Explanatory note

This Order, which comes into force on 1st January 2005, forms part of the implementation of Council Directive 2003/92/EC (OJ L260, 11.10.03 p.8). It is part of a package of new measures which apply to supplies of natural gas and electricity. A transposition note in respect of this implementation is available at www.hmce.gov.uk.

Part 1 of the Order varies the rules for determining the place where a supply of goods is made and applies Part 3 of the Order (supplies of gas and electricity) to any supplies made on or after 1 January 2005. It also revokes The Value Added Tax (Place of Supply of Goods) Order 1992 (S.I. 1992/3283).

Part 2 of the Order re-enacts, with minor amendments, the provisions of The Value Added Tax (Place of Supply of Goods) Order 1992. It applies to goods supplied on board ships, aircraft and trains engaged in the intra-Community transportation of passengers and provides for the place of supply of those goods to be the member State in which the transportation commenced. However, goods supplied for consumption on board ships and aircraft are treated as supplied outside the Community.

Article 10 applies to supplies of gas supplied through the natural gas distribution network and of electricity where they are made to a dealer. It makes the place of supply the place where the dealer has established his business or is domiciled.

Article 11 applies where supplies of the same type are made to somebody other than a dealer. It makes the place of supply the place where the gas or electricity is effectively used and consumed. Where any part of the natural gas or electricity is not so used and consumed, the place of supply is the place where the customer has established his business or is domiciled.

Article 12 treats a person who combines a supply of gas or electricity with other goods or services for the purposes of reselling them, as having used and consumed that gas and electricity. This is to ensure that Article 11 applies as intended at the final stage of a supply chain in circumstances where the nature of the supply changes such that they are no longer relevant goods.

Article 13 provides that a supply of gas or electricity to a member of a VAT group is a supply for effective use and consumption even where the gas or electricity is to be so used or consumed by another member of that VAT group. This is to ensure that Article 11 still has effect where the supply between the group members, to which Article 11 would otherwise apply, is disregarded under section 43(1)(a) of the Value Added Tax Act 1994.

Article 14 defines a person who is outside the United Kingdom for the purposes of section 9A of the Value Added Tax Act 1994.

A full regulatory impact assessment of the effect that this instrument will have on the costs of businesses is available at www.hmce.gov.uk.