A: This transaction is outside the scope of UK VAT because the goods never enter the UK so there is no UK VAT applicable. The sale value should still be included in Box 6 of the UK VAT return as it is still a supply by the business.
Due to the location of the goods at the point of sale, the client appears to have an EU VAT registration issue as that is where the supply of goods takes place VAT purposes (either Portugal or Spain). In this instance we would advise the client to seek EU VAT advice to work out whether there are any registration implications for it in either EU country. Without an EU VAT registration, I would expect the Portuguese manufacturer to charge the client Portuguese or Spanish VAT, which the client will not, on the face of it, be able to recover.
These publications from Markel Tax were correct at the time of going to press and should be considered as principles-based guidance only. To check current validity, call the Markel Tax helpline. ICAEW (as distributor) disclaims all liability for any errors or omissions.
About Markel Tax
Markel Tax offers expert advice on UK tax and VAT via its helpline and provides monthly FAQs with questions and answers on common tax issues for businesses and practitioners.