01 Aug 2010

VAT on the import (and sale) of natural gas

In July, we sent round an update on the proposals for the VAT treatment of the import and sale of natural gas.

We expect to be able to provide more information on this later in the year. However, in the meantime, it appears there may have been some misunderstanding about the implications for imports.

Some companies may be under the impression that, because all imported natural gas (including liquefied natural gas imported by tanker) will be zero-rated from 1 January 2011, this will mean there will no longer be any need to complete the C88 import declarations.

However, the proposed change will not extend that far. This is because the C88 is a form principally used for controlling the actual movement of goods into the UK from outside the EU (and vice-versa). These forms will still be required from1 January 2011 to provide this information. The only difference, therefore, is that they will no longer show any amounts due by way of VAT – i.e. there will be no longer any need to pay VAT over to HMRC on account and to reclaim it in the VAT return. This will obviously have a useful cash-flow advantage (or will get rid of the cash flow disadvantage) and will give the treatment companies have been lobbying for since the original rules were introduced.

Anyone wanting further clarification on this may contact Peter Landon or their usual CWE contact.