VATSC02105 | Basic principles and underlying law: Scope of VAT: Introduction

The scope of VAT is defined in Section 4(1) of the VAT Act 1994:

VAT shall be charged on any supply of goods or services made in the United Kingdom, where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him

A transaction is within the scope of UK VAT if the following four conditions are met:

• it is a supply of goods or services

• it takes place in the UK

• it is made by a taxable person (someone who is, or is required to be registered)

• It is made in the course or furtherance of any business carried on or to be carried on by that person.

To decide whether a transaction is within the scope of UK VAT, you should be satisfied that it meets all these conditions.

It is essential that you confirm that a transaction falls within the scope of VAT before moving to second-level questions of either mechanics, for example time of supply, input tax etc, or liability.

When a transaction does not meet all of the conditions that is the transaction:

• is neither a supply of goods or services

• does not take place in the UK

• is not made by a taxable person, or

• is not made in the course or furtherance of business

it is outside the scope of UK VAT.