Post Brexit VAT Recovery -Specified Supplies

We have received an update on Specified Supplies.  New legislation was laid before Parliament on 5th February 2019 and the link is as follows.

Just to recap, this is the legislation which deals with VAT recovery on respect of certain types of transactions specified in law. The supplies of services currently specified in the Value Added Tax (Input Tax) (Specified Supplies) Order 1999 (SI 1999/3121) are:


(a) which are supplied to a person who belongs outside the member States;

(b) which are directly linked to the export of goods to a place outside the member States; or

(c) which consist of the provision of intermediary services within the meaning of item 4 of Group 2, or item 5 of Group 5, of Schedule 9 to the Value Added Tax Act 1994 in relation to any transaction specified in paragraph (a) or (b) above,

provided the supply is exempt, or would have been exempt if made in the United Kingdom, by virtue of any item of Group 2, or any of items 1 to 6 and item 8 of Group 5, of Schedule 9 to the Value Added Tax Act 1994.

The new legislation seems to maintain the status quo and continues to deny VAT recovery in respect of specified supplies to UK and EU customers. It does so by the following amendments:

  • in paragraph (a) “the member States” is substituted by  “the United Kingdom and the member States”; and
  • in paragraph (b) “the export of goods to a place outside the member States” is substituted by “the export of goods from the United Kingdom or a member State to a place outside the United Kingdom and the member States”.

HMRC has advised that:

As Brexit decisions affecting the regulatory treatment of financial services, are still to be made, the government is keeping the issue of a post Brexit VAT effective zero-rate for exports of financial services to the EU under review. Announcements on any such changes would be made in due course.”

There is also a comment in the Explanatory Memorandum to the effect that:

This legislation will be kept under review through communication with key stakeholder groups including the Joint VAT Consultative Committee“.

Dean Carey of Constable VAT represents the ACCA as a member of the JVCC and will be involved in those discussions if businesses have issues that they wish raised.

For the moment, businesses making specified supplies are likely to retain their current VAT recovery rights. It remains to be seen if anyone will challenge this new legislation on the basis that it is discriminatory. If there is any uncertainty on future VAT recovery of any of your clients please contact Constable VAT.

We will continue to keep our website updated as and when we receive updates.