VAT and the Channel Islands (Jersey, Guernsey etc)
The status of these islands for VAT purposes often causes confusion for UK businesses selling goods or services there: are they part of the UK, or aren’t they?
Well, the Channel Islands (Jersey, Guernsey, Alderney, Sark and Herm) are NOT part of the UK or the European Union for VAT purposes.
Does this mean you need to charge VAT on sales to Jersey? The answer depends on whether you are selling goods or services.
VAT on goods
Goods exported to the Islands can be zero-rated for UK VAT purposes, as long as documentary evidence of the export is kept. Any extra charges made for freight, shipping, postage or delivery are also zero-rated.
Even where VAT is not being charged, the net value of the sale must still be reported on the UK VAT return, in box 6. It should not be included on the EC Sales List, nor on an Intrastat return if the business is required to make one.
If the UK business accounts for VAT on the Flat Rate Scheme, it must include the value of the export in the turnover on which the Flat Rate VAT is paid. This may mean that the business is better off not being on the Flat Rate Scheme.
There is no requirement to account for VAT on imports into the UK from the Islands in the same way as from other EU states.
As the Islands do not have their own VAT, a UK business should not be charged Channel Islands VAT on any goods, but may be charged the standard rate of UK VAT on importing goods into the UK. This can be reclaimed on the regular UK VAT return, subject to the normal rules about reclaiming input VAT.
Since May 2008, Jersey has operated a Goods and Services Tax (GST) on some supplies, initially at 3% and then since June 2011 at 5%. This works in a different way to the Value Added Tax systems operated by the rest of the EU. It should only be charged to customers who are based in Jersey.
VAT on services
UK VAT may need to be charged on services performed in the Islands or to clients based in the Islands, depending on the nature of the service supplied. This is a complex area, but broadly, assuming the supplier belongs in the UK and the customer belongs in Jersey, UK VAT will need to be charged on most services unless one of the following exceptions applies:
- UK VAT does not need to be charged on most services relating to land or property situated in Jersey. This includes estate agency, conveyancing, architects, surveying, construction, property maintenance, hotel accommodation, defined exhibition stands, and property management services.
- UK VAT does not need to be charged on most services related to a live event or physical activity carried out in Jersey. This includes cultural, artistic, sporting, scientific, educational, training, entertainment, exhibition and valuation services.
- UK VAT does not need to be charged on passenger transport carried out in Jersey.
- UK VAT does not need to be charged on most ‘intellectual’ or ‘intangible’ services supplied to a customer who belongs in Jersey. This includes copyright, royalties, licences, advertising, consultants, engineers, lawyers, accountants, banking and insurance. If the service relates to land or property situated in the UK, VAT still needs to be charged.
With all these services, it is important to look at the precise nature of the underlying service being provided. A business cannot turn one type of service into another simply by changing the description on the invoice.