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 EC for VAT purposes, so their treatment is the same as for the rest of the world (outside the EC).
Does this mean you need to charge VAT on sales to Jersey? The answer depends on whether you are selling goods or services.
Goods
Goods exported to the Islands can be zero-rated for UK VAT purposes, as long as documentary evidence of the export is kept.
There is no requirement to account for VAT on imports into the UK from the Islands in the same way as from other EC states.
Since 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 17.5% 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.
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.
There are special rules for hired goods (section 13 of VAT Notice 741) and telecommunications (section 14 of VAT Notice 741).
For freight transport and associated services, refer to VAT Notice 744B.
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.
Ruben says:
We are delivering goods from Holland to a customer (buyer) on the Channel Islands. Goods are being delivered to the UK (Fareham).
26 September 2008The customer is taking care for transport from the UK to the Channel Islands. Do you know how to handle this VAT issue? It is causing us headaches ;-). Thanks in advance.
admin says:
If you are delivering your goods from Holland to the UK, then you proceed in the same way as if you were delivering to a UK customer. In summary, if your Channel Islands customer can give you their UK VAT registration number, and you keep documentary proof of the movement of goods, then you do not need to charge Dutch VAT. If either of those conditions is not met, then may have to charge Dutch VAT.
What your customer does with the goods once they are on UK soil is no longer your concern.
27 September 2008Dave says:
When selling items such as clothing, accessories etc to the Channel Islands, alot of the customers ask us to deduct the VAT for them. Can we do this?
23 October 2008admin says:
Goods exported to Jersey would not normally have VAT charged, so I am not sure what you mean by deducting VAT for your customers.
24 October 2008