Small business and tax blog

The status of this territory for VAT purposes often causes confusion for UK businesses selling goods or services there: is it part of the UK, or not?

Well, Gibraltar is a British Overseas Territory, and also part of the EU, but under Article 28 of the 1971 UK Accession Treaty it is not part of the EC Customs Union, so its 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 Gibraltar? The answer depends on whether you are selling goods or services.

VAT on goods

Goods exported to Gibraltar 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 Gibraltar in the same way as from other EC states.

Since Gibraltar does not have its own VAT, a UK business should not be charged Gibraltar 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.

VAT on services

UK VAT does not need to be charged on most services relating to land or property situated in Gibraltar. This includes estate agency, conveyancing, architects, surveying, construction, property maintenance, hotel accommodation, defined exhibition stands, and property management services.

UK VAT may need to be charged on services performed in Gibraltar or to clients based there, 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 Gibraltar, 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 related to a live event or physical activity carried out in Gibraltar. This includes cultural, artistic, sporting, scientific, educational, training, entertainment, exhibition and valuation services.

UK VAT does not need to be charged on most ‘intellectual’ or ‘intangible’ services supplied to a customer who belongs in Gibraltar. 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.

UK VAT does not need to be charged on passenger transport carried out in Gibraltar.
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.

Was this page useful? Bookmark it or tell others...