What transactions are subject to VAT under section 1 of the Value Added Tax Act 1994?

Section 1 charges VAT on two broad categories: the supply of goods or services made in the United Kingdom, including anything treated as a supply under the Act such as internal transfers or benefits in kind, and the importation of goods into the United Kingdom from abroad, where VAT is due at the point of importation.

Who is liable to pay VAT on supplies of goods or services in the United Kingdom?

The person making the supply — typically the seller or service provider — is liable for the VAT. The tax becomes due at the time of supply, which is usually triggered when goods are delivered or an invoice is issued, whichever is earlier. The supplier must then account for the output tax to HMRC.

How is VAT collected on goods imported into the United Kingdom?

VAT on imported goods is charged and collected as though it were import duty, using the same customs mechanisms for assessment and enforcement. In practice, import VAT is collected at the border or, for businesses using postponed VAT accounting, declared on the VAT return. This ensures imported goods bear the same VAT burden as domestically supplied goods.

Why does section 1 treat import VAT like a customs duty?

Treating import VAT as if it were import duty ensures a level playing field between UK-produced and imported products. It allows customs authorities to use established duty collection and enforcement processes, making administration efficient. Businesses may use postponed VAT accounting to declare import VAT on their VAT return rather than paying at the border.

Value Added Tax Act 1994 section 1

Value added tax

Section 1 establishes the fundamental charging provision for Value Added Tax (VAT) in the United Kingdom, setting out what transactions are subject to VAT and who is liable to account for it.

VAT is charged on the supply of goods or services made in the United Kingdom, including anything that is treated as a supply under the Act.
VAT is also charged on the importation of goods into the United Kingdom.
The person making the supply is liable for the VAT, and the tax becomes due at the time the supply takes place, subject to the rules on accounting and payment.
VAT on imported goods is charged and payable as though it were import duty, meaning it follows the same collection and payment mechanisms used for customs duties.

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