Value Added Tax Act 1994 section 31A

Partially exempt supplies

Section 31A provides a mechanism for partially exempt businesses to treat certain movements of goods from Great Britain to Northern Ireland as zero-rated taxable supplies, enabling them to recover VAT that would otherwise be blocked by partial exemption rules.

• When a partially exempt business moves goods from Great Britain to Northern Ireland, and the VAT on those goods was wholly or partly blocked as input tax because it was attributed to exempt (or mixed exempt and taxable) supplies, the movement is treated as a deemed zero-rated taxable supply.
• The deemed supply only applies where the goods were acquired or imported within the previous 12 months, the person is VAT-registered at all relevant times, and the goods have either not been used before removal or will continue to be used for the same category of supplies (exempt, or mixed) after removal.
• The zero-rating of the deemed supply allows the business to recover the previously blocked input tax by creating a new taxable supply to which it can be attributed.
• Any VAT incurred on the physical removal of the goods from Great Britain to Northern Ireland (such as logistics costs) cannot itself be attributed to this deemed supply for input tax recovery purposes.