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1. Introduction

The formation of the European Community (EC) Single Market requires a change in the way VAT is paid on goods and supply of services moving between EC countries.

The main requirements will be that for VAT purposes, the concept of Import and Export of goods/services between EC countries will disappear. For most transactions between VAT registered traders, Tax will now be due on "Acquisition" of the goods/services by the customer.

2. Implications

Where VAT registered traders in one EC country despatch goods/services to registered traders in another EC country, the supply will normally be zero-rated. No VAT will be paid at the frontier. The customers will acquire the goods/services when they are supplied to them, and will account for VAT on their VAT returns at the rate in force in the country of receipt. This is known as the "Destination System".

Where VAT registered traders despatch goods/services to unregistered traders in another EC country, in most cases' suppliers will charge VAT at the rate in force in the country of despatch. This is the "Origin System".

The arrangements applying to goods/services imported/exported from/to countries outside the EC.

The attached information sheets give general advice to departments involved in trade with other EC countries on the new arrangements for the Acquisition and Supply of Goods/Services.

3. Goods purchased by Â鶹´«Ã½¸ßÇå°æ from another EC Country

Departments purchasing goods/services from persons registered for VAT in other EC countries will no longer have to pay Tax on importation. Instead, in most cases, VAT will have to be accounted for on acquisition of the goods/services in the UK.

You may ask the question "What exactly does this mean and what needs to be done?"

In brief, the following:

a) Firstly when placing an order for goods/services with a supplier from another EC country, you should in future quote the University's VAT Registration Number and Country Code Prefix on all such orders. This is GB 728 8856 74.

b) The invoice you receive from the supplier of the goods/services will show a VAT exclusive charge, provided the supplier has prior knowledge of Â鶹´«Ã½¸ßÇå°æ VAT Registration Number and Country Code prefix (GB 728 8856 74).

c) The amount shown on the invoice you receive from the supplier is the amount you pay to the supplier through the University Payments System.

d) You must then advice the Finance Office that you have purchased goods/services from another EC country. A copy of the supplier's invoice should be sent to Carl Shipton.

e) Following the receipt of the information in (d) above, the Finance Office will then debit your original cost code with the VAT element on the price you contracted to pay the supplier of the goods/services. Where associated services, such as packing, transport and insurance costs, are separately invoiced but form part of the contract price, these too will attract VAT and copies of these invoices should also be sent.

In cases where the goods/services in question are at present zero-rated or exempt from VAT in the UK, then no VAT will be added to the cost of such goods/services if purchased from another EC country. Library Books for instance are a typical example.

f) The VAT debited against you account will be paid to H.M. Customs and Excise by the Finance Office. However, there will be some instances where this VAT may be reclaimed (commercial activities) and this will result in a nil repayment to H.M. Customs and Excise. Unfortunately, it is still necessary to carry out the above procedures.

The net effect of these changes in financial terms is no different to the previous system in so far as the cost to the departments will be the same. The difference is that under the new rules the University will be paying the VAT directly to H.M. Customs and Excise on "Acquisition" whereas previously VAT was paid on importation.

IMPORTANT POINTS
i) It is important that the supplier of the goods is aware of the University's VAT Registration Number and Country Code Prefix (GB 728 8856 74). You should quote this reference on all purchase orders.

ii) You must inform the Finance Office of all transactions involving goods/services purchased from other EC countries. If the University fails to account for Tax (VAT) on goods/services acquired from another EC country, a financial penalty will be incurred.

iii) The VAT which will apply to goods/services purchased from another EC country will be the rate in force in the UK - currently 17.5% for standard rated supplies. This is the rate at which the VAT under (E) above will be calculated.

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4. Goods sold by Â鶹´«Ã½¸ßÇå°æ to another EC Country

Departments selling goods/services to businesses registered for VAT in other EC countries will be able to continue to zero-rate the sale provided:

a) You obtain your customer's VAT Registration Number (with a 2-digit Country Code Prefix).

b) You show your customer's VAT Registration number, including the 2-digit Country Code Prefix on your sales invoice.

c) The goods/services are despatched or transported to a destination outside the UK.

d) You hold commercial documentary evidence that the goods/services have been removed from the UK.

Unless you meet all of these conditions, you cannot zero-rate your supply, and should account for Tax on the goods/services in the UK (unless the goods/services are currently zero-rated). Similarly, if you sell goods/services to businesses that are not registered for VAT in other EC countries you should charge VAT on your sales invoice at the appropriate rate in force in the UK - currently 17.5% for standard rated supplies.

Your tax invoice to customers in other EC countries will have to show the prefix "GB" before our VAT Registration number to show that we are registered for VAT in the UK.

IMPORTANT POINTS

i) It is most important that your sales invoice shows your customer's VAT Registration Number and Country Code Prefix.

ii) If you are unable to show your customer's VAT Registration Number and Country Code Prefix on your invoice, you must charge VAT on the cost of the goods/services, and this must be clearly shown on your invoice.

iii) You must inform the Finance Office of all the transactions involving the sale of goods/services to other EC countries. This can be done by sending Carl Shipton copies of all such sales invoices.

Under the new arrangements, the University is required to provide H.M. Customs and Excise with detailed information of all goods/services sold to other EC countries, thus it is vital that you inform this office of all such sales. Failure to comply with the new requirements could result in penalties and investigations.


Format of other EC Member States' VAT Registration Numbers

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Member State	Country Code	Format of VAT number	Number of Characters	Notes
Austria	AT	U12345678	9	The first character will always be U.
Belgium	BE	123456789	9	Ìý
Denmark	DK	12345678	8	Ìý
Finland	FI	12345678	8	Ìý
France	FR	12345678901 or X1123456789 or 1X123456789 or XX123456789	11	May include an alpha character(s), either first, second or first and second. All alpha characters except I and O are valid.
Germany	DE	123456789	9	Ìý
Greece	EL	12345678	8	Ìý
NB Greece - change	EL	123456789	9	from 1 Jan 1999
Ireland	IE	1234567X or 1X34567X	8	Includes one or two alpha characters, either last or second and last.
Italy	IT	12345678901	11	Ìý
Luxembourg	LU	123456768	8	Ìý
Netherlands	NL	123456789B01	12	The three digit suffix will always be in the range B01 to B99
Portugal	PT	123456789	9	Ìý
Spain	ES	X12345678 or 12345678X or X1234567X	9	Includes one or two alpha characters, either first or last, or first and last
Sweden	SE	123456789012	12	Ìý

IMPORTANT

One of the conditions for zero-rating supplies of goods/services to other Member States is that you must provide a valid VAT registration number for each of your customers. The table displays the ONLY acceptable format and length of VAT numbers for intra-Community trade in other member states.

Once advised by H M Customs and Excise that a VAT number is invalid, you must not continue to use it to zero-rate your supplies.