The FTT has held that3 a taxpayer’s supply of goods to a customer in another member state was correctly zero-rated, notwithstanding that the customer de-registered for VAT part way through trading.


The VAT registered taxpayer, Fleming Agri-Products Limited, is a Northern Ireland manufacturer and supplier of agricultural equipment. The taxpayer had for many years supplied equipment to a customer in the Republic of Ireland (ROI) who, at the beginning of the arrangement, had been registered for VAT in the ROI. Unbeknown to the taxpayer, the customer had subsequently been de-registered. The date of de-registration was taken to be 12 October 2010.

In early October 2012, HMRC advised the taxpayer during a visit that the customer was no longer VAT registered and sought to assess for under-declared output tax in the sum of £87,158. The taxpayer argued that it had properly zero-rated the supplies that had been made because it:

  • had originally obtained the customer’s VAT number when trading commenced and had confirmed that number on the Europa website;
  • had made regular checks to ensure the number was still valid at intervals of approximately every two to three years; and
  • had not been put on notice of any irregularity because the level of on-going trading between the taxpayer and the customer exceeded normal VAT thresholds.

The taxpayer therefore argued that it should be entitled to rely on the defence under Public Notice 725 (which sets out the circumstances in which a supplier to a customer in another EU member state can zero-rate supplies) because its checks had been sufficient and it had taken reasonable steps to confirm its customer’s VAT status in the course of the trading. HMRC disagreed, contending that in order to benefit from the defence the taxpayer had to have taken “all reasonable steps” to ensure its customer was registered for VAT.

The FTT’s decision

The FTT emphasised that cases such as these are highly fact sensitive. However, as a general rule, taxpayers need to operate systems to ensure that proper and periodic enquiries are made into the VAT registration numbers of customers based in other EU member states, including by checking the Europa website.

On this occasion, the FTT was persuaded on the facts that the taxpayer could be said to have taken “all reasonable steps”. In reaching this view, the FTT took account of:

  1. the lengthy period of trading between the taxpayer and its customer;
  2. the taxpayer’s initial enquiries into the customer’s VAT registration and subsequent checks every “two or three years” thereafter; and
  3. the significant level of business with the customer which suggested that the customer remained VAT registered and gave the taxpayer no cause to suspect otherwise.


Cases on this issue will, as the FTT noted, remain highly fact sensitive. However, this decision provides helpful guidance as to the approach the FTT is likely to adopt when considering the reasonableness of a taxpayer’s approach to the verification process for cross-border VAT sales.

To read the decision click here.