VAT: Changes to the rules for call-off stock arrangements between EU member states

HMRC has issued a policy paper to advise of new rules for the VAT treatment of call-off stock with effect from 1 January 2020.

The new rules have been introduced to create a common approach to the VAT accounting for call-off stock in all Member States.

Call-off stock refers to goods transported by a supplier from a Member State of origin to a Member State of destination. At the time of the transport of goods, the supplier already knows the customer to whom these goods will be supplied (called-off) at a later stage and after they have arrived in the Member State of destination.

The new rules permit the intra-community supply of the goods to be treated as occurring when the goods are called-off and the final supply is made to the customer.

That means that the physical movement of the goods from the Member State of origin to the Member State of destination does not give rise to an intra-community supply. The goods that are held as call-off stock in the Member State of destination are considered, for VAT purposes, to still be within the scope of VAT in the Member State of origin.

At the point when the goods are called-off by the customer, the normal VAT accounting rules for a cross border sale of goods apply; that is the customer accounts for acquisition tax.

Conditions

Businesses must comply with a number of conditions if they want to take advantage of this simplification. The key conditions are that at the time of removal of the goods from the Member State of origin to the Member State of destination by or under the directions of the supplier:

  • a call-off stock agreement is in place with the customer
  • the supplier is removing the goods to the Member State of destination with the intention of supplying those goods to the customer there after their arrival in the Member State of destination
  • the supplier does not have a business establishment or other fixed established in the destination member State
  • the customer is VAT registered in the Member State of destination and the supplier knows the customer’s identity and VAT registration number
  • the supplier records the removal of the goods in the register referred to below
  • the customer’s VAT registration number in the Member State of destination is reported on the supplier’s EC sales list

Evidence of removal of goods

The force of law conditions in Notice 725 will be modified to apply to call-off stock arrangements. In the meantime, the following has force of law.

Where goods are removed from the UK and the conditions set out in the section above apply, the time limit for getting valid evidence of removal is three months from the time the goods leave the UK.

In all other cases, the time limits for removing the goods and getting valid evidence of removal will begin from the time of supply. For goods removed to another Member State the time limits are as follows:

  • three months (including supplies of goods involved in groupage or consolidation prior to removal)
  • six months for supplies of goods involved in processing or incorporation prior to removal.

Record keeping

As a condition of the application of the new simplified rules, the supplier must record in a register (the Call-off Stock Register) the transfer of stock to the Member State of destination under the call-off stock arrangements.

When the goods are physically removed to the Member State of destination, a record must be made of the transfer of the goods. The Call-off stock Register must also be kept up to date, and it must record when goods are called-off.

The Implementing Regulation requires the supplier’s Call-off Stock Register to record:

a. the Member State of origin and the date of dispatch or transport of the goods

b. the VAT registration number of the customer in the Member State of destination

c. the Member State of destination, the VAT registration number of the warehouse keeper, the address of the warehouse at which the goods are stored upon arrival and the date of arrival of the goods in the warehouse

d. the value, description and quantity of the goods that arrived in the warehouse

e. the VAT identification number of the taxable person substituting for the customer, where the Substitution Rule conditions are satisfied

f. the date on which the goods are called-off by the customer in accordance with the conditions for the simplified treatment, the taxable amount, description and quantity of the goods so called-off by the customer and the customer’s VAT registration number in the Member State of destination

g. the taxable amount, description and quantity of the goods affected by a relevant event and the date of the relevant event

h. the value, description and quantity of the returned goods and the date of the return of the goods referred to as Returned Goods

The Implementing Regulation requires the customer’s Call-off Stock Register to record:

a. the VAT registration number of the supplier of the goods subject to the call-off stock arrangements

b. the description and quantity of the goods intended for him

c. the date on which the goods intended for him arrive in the warehouse

d. the taxable amount, description and quantity of the goods supplied to him and the date on which the customer’s intra-community acquisition of the goods is made

e. the description and quantity of the goods, and the date on which the goods are removed from the warehouse by order of the supplier

f. the description and quantity of the goods destroyed or missing and the date of destruction, loss or theft of the goods or the date on which the goods were found to be destroyed or missing

Where the customer is not the warehouse keeper, their Call-off stock Register does not need to contain the information referred to in points (c), (e) and (f).

Records must be preserved for six years.

Contracting parties are recommended to set out in the contract(s) how they intend to fulfil the record keeping requirements, including how the necessary information is to be communicated between the parties.

If a business fails to make or retain the required records, it may be liable to a penalty.

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