VAT – onward supply relief
HMRC have published a new version of notice 702/7 entitled ‘Import VAT relief for goods supplied onward to another country in the EC’. The notice is designed to assist VAT registered businesses and agents that import goods from outside of the EC as part of an onward supply to another country in the European Union.
There is a special relief which allows for the import of goods into the first EC member state to be relieved from import VAT.
This relief is known as onward supply relief (OSR) and parts of the HMRC notice have the force of law. In order to claim OSR, VAT registered businesses must make a zero-rated supply of the imported goods to a VAT registered business in another EC country. The final recipient of the goods will account for acquisition tax.
The notice has been clarified to make it clear that OSR can only be used by
- a UK VAT registered importer, or
- a UK VAT registered agent appointed to act as importer on behalf of a trader who is not based in the UK and not VAT registered in the UK
The use of OSR is not available to a freight agent merely responsible for the shipping of the goods.