Supply and Install post 31/12/20 - response from HMRC

In July, Andrea raised the following questions with HMRC regarding supply and install contracts and has received this response.

We suggest that colleagues in procurement liasie with their tax colleagues before any major S&I contracts involving EU suppliers are procured.

If you have any questions please contact Andrea.

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Email to HMRC

Background

My understanding is that when universities procure supply and install contracts, ownership of the goods only transfers to the customer when the equipment has been installed or commissioned. So the supplier owns the goods at the point that they are imported into the UK.

Before 31 December 2020, a simplification was in place so that if an EU supplier carried out a supply and install contract in the UK the EU supplier did not have to VAT register in the UK; the customer would self-charge the VAT due on the movement of goods into the UK and the service element via an acquisition tax adjustment on the VAT return.  (Based on section 11 of the public notice, VAT on movements of goods between Northern Ireland and the EU, this simplification is still available to customers located in Northern Ireland.)

Current issue

Queries have been raised by members about this issue after 31 December 2020 and whether an EU supplier now has to register for VAT in the UK.  We have been advising members that UK VAT registration by the supplier is necessary, but last week I spotted this updated guidance:

VATPOSG3400 - Main rules: installed or assembled goods now reads:

 Simplification arrangements

Depending on the circumstances an overseas supplier installing or assembling goods in the UK may be liable to register for VAT here even for a one-off supply. A simplified procedure is available for EU businesses installing or assembling goods in Northern Ireland. You can find more details about this in VATNIEU.

There is a more limited simplification arrangement for installed or assembled goods imported from a third country. So long as it is a one-off supply the supplier can exceptionally treat the supply as taking place outside the UK. This requires the customer to act as the importer of the goods and the full contract price to be declared on the import entry. This does have the effect of increasing the value on which import duty may be charged, compared to the simple importation of the goods.

Questions

This had led to some questions from members:

• By “one-off” transaction, does this mean one-off transaction by the supplier making a sale into the UK and, if so, over what time period, or is it is a “one-off” transaction when dealing with each customer?
• How is “full-contract” defined?
• RCB 15(2020) states that: “It is the owner, whose details (EORI) should be shown in box 8 of the import declaration, who is eligible to reclaim the import VAT”.  Is the simplification set-out in VATPOSG3400 therefore an exception to this, because even though the customer may be named as importer of record, ownership of the goods does not usually transfer to the customer until installation or commissioning?  (To be blunt, customers what to know that the item is satisfactory before purchasing it!)