Explanatory note

This Order, which has effect in relation to supplies made on or after 1st July 2014, applies a reverse charge to specified goods of a kind used in missing trader intra-Community fraud.

Council Directive 2006/112/EC^f1 (“the Principal VAT Directive”) establishes a common system of value added tax applicable throughout the European Union. As a general rule the Principal VAT Directive requires the person who makes supplies of goods or services to account for and pay the VAT on those supplies. However, in certain circumstances, the VAT may be required to be accounted for and paid by the recipient of those supplies. This charge is referred to as a “reverse charge”.

The Principal VAT Directive was amended by Council Directive 2010/23/EU^f2 which inserted Article 199a. Article 199a permits Member States to apply a reverse charge in certain circumstances. Article 199a was itself amended by Council Directive 2013/43/EU^f3 which extends the circumstances in which Member States may apply a reverse charge to combat missing trader intra-Community fraud. In particular, it permits Member States to apply a reverse charge until 31 December 2018 and for a minimum period of two years to supplies of gas and electricity to a taxable dealer as defined in Article 38(2) of the Principal VAT Directive.

Article 3 of the Order provides that goods of a description specified in article 4 of the Order are specified supplies for the purposes of section 55A of the VAT Act 1994 (c.23) (customers to account for tax on supplies of goods or services of a kind used in missing trader intra-Community fraud) (“the Act”) and that supplies which are specified in article 5 of the Order are excepted supplies for the purposes of section 55A of the Act.

Article 4 of the Order specifies the goods which are specified goods for the purposes of section 55A of the Act.

Article 5 of the Order specifies the supplies which are excepted supplies for the purposes of section 55A of the Act.

Supplies of gas and electricity are treated as supplies of goods by virtue of paragraph 3 of Schedule 4 to the Act.

A Tax Information and Impact Note covering this instrument was published at Budget 2014 and is available on the HMRC website at HM Revenue & Customs: Tax Information and Impact Notes (TIINs). It remains an accurate summary of the impacts that apply to this instrument.