HMRC has published new sections in its VAT Place of Supply (Goods) Manual on distance selling. The new sections relate to artificial structures which HMRC considers are designed to achieve a more favourable VAT outcome.

The distance selling rules apply to businesses selling goods cross-border to private individuals. The rules shift the normal place of supply from the member state of dispatch to the member state of delivery, where the business must then register and account for VAT. In the UK this is dealt with by section 7(4), Value Added Tax Act 1994 (VATA).

HMRC is of the view that some businesses may have sought to avoid the rules by, for example, arranging for a third party to enter into a separate delivery contract with the individual customer (known as “artificial splitting”).

A copy of the updated guidance is available to view here.