Understanding the Place of Supply of Goods : VAT Guide 2025

Why the Place of Supply Matters

Understanding the place of supply rules is critical for VAT compliance for UK businesses trading in goods. Whether you’re selling domestically or internationally, knowing where the supply of goods is deemed to occur determines if VAT is chargeable and, if so, in which country. These rules impact pricing, invoicing, and whether a business needs to register for VAT in another country.

Let’s break down the principles behind the place of supply of goods and explore how it affects various sales and fulfilment scenarios, especially in the post-Brexit trading landscape.

Basic Rule: Where Are the Goods When Supplied?

The starting point for determining the place of supply is simple: the supply takes place where the goods are located at the point they are allocated or dispatched to the customer.

• If goods are in the UK and sold to a UK customer, the sale is subject to UK VAT, which must be charged at the appropriate rate.
• If goods are in the UK and sold to an overseas customer and then exported from the UK, the supply can be zero-rated—provided that the business meets certain conditions and retains evidence that the goods have left the country.
• If goods are located outside the UK, they are generally outside the scope of UK VAT, even if sold by a UK business.

This principle is governed by a hierarchical set of rules, meaning businesses must follow them in order until they find the applicable condition.

Exporting Goods: When Zero-Rating Applies

Zero-rating helps businesses that export goods from the UK. It means that businesses do not charge VAT to their customers, but they can still reclaim VAT on related costs.

However, to apply zero-rating, the following must be ensured:

• The goods physically leave the UK within the prescribed timeframe.
• The supplier retains valid evidence showing that the goods were exported.
• The transaction is correctly documented and invoiced as an export.

Failure to meet these conditions can result in VAT being due on the sale, potentially making the transaction less profitable and leading to compliance issues.

Cross-Border Fulfilment: Goods Sourced from Overseas

Increasingly, UK businesses fulfil customer orders by having goods shipped directly from overseas suppliers to customers in other countries. While convenient, this setup can have complex VAT consequences.

Scenario 1: UK Business Acts as Importer

Imagine a UK business buys goods from a US supplier and arranges for those goods to be delivered directly to a customer in France. If the UK business is the one importing the goods into France:

• It becomes the importer of record.
• It must pay import VAT and any duties to French authorities.
• It is treated as making a domestic supply in France.
• It must register for VAT in France and charge French VAT to the customer.
• It can reclaim the import VAT on its French VAT return.

This arrangement creates compliance obligations and potentially added costs for the UK business.

Scenario 2: Customer Acts as Importer

Now, suppose the French customer imports the goods. In this case:

• The goods are treated as delivered to the customer from the USA.
• The place of supply is outside the scope of UK VAT.
• The customer pays the import VAT and duties in France.
• The UK business does not charge VAT or need to register in France.

This setup simplifies matters for the UK business but may deter customers unwilling to handle customs paperwork or charges themselves.

Northern Ireland and EU Sales

The rules differ slightly for goods moved from Northern Ireland to EU countries. Under the Northern Ireland Protocol, Northern Ireland remains aligned with certain EU VAT rules for goods. Therefore, a UK business may find itself:

• Making intra-EU supplies requires an EU VAT number.
• Needing to register for VAT in the destination Member State.
• Dealing with EU VAT compliance, including invoices, returns, and reporting.

This contrasts with goods sold from Great Britain to the EU, which are generally considered exports from a third country.

Post-Brexit VAT Registration in the EU

Since the end of the Brexit transition period, UK businesses selling goods into the EU face new challenges:

• Distance selling rules no longer apply to UK businesses.
• Many EU customers prefer deliveries “duty paid,” where the seller handles all import obligations.
• This often makes the UK seller the importer, triggering a need to register for VAT in the customer’s country.

Some UK businesses are responding by setting up warehouses or appointing fiscal representatives within the EU to simplify logistics and VAT compliance.

What UK Businesses Need to Consider

To ensure VAT compliance and efficient cross-border trade, UK businesses must:

• Determine where the goods are located at the point of supply.
• Understand who is acting as the importer of record.
• Consider the VAT registration and reporting obligations in other countries.
• Keep full evidence and documentation when applying zero-rating for exports.
• Monitor customer preferences for delivery and who bears customs costs.

Final Thoughts

VAT and place of supply rules are foundational for any UK business involved in the movement of goods, whether domestically or internationally. Understanding these rules ensures correct VAT treatment, helps avoid unexpected costs, and prevents compliance issues in both the UK and abroad.

As global trade becomes more digital and direct-to-customer fulfilment continues to rise, navigating VAT rules requires up-to-date knowledge and, often, professional advice.

Need Help with VAT Compliance or EU Registrations?

At Tax Accountant, we help UK businesses manage cross-border VAT, navigate complex supply chain structures, and stay compliant in multiple jurisdictions. Contact us today to ensure your business stays VAT-compliant wherever your customers are.