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     3. In regulations 53(2)(a) and 54(1)(e) and (2) (exit), for "£825,000" substitute "£1,600,000".

Returned goods relief
     4. After regulation 121C, insert—

" Adaptations and exceptions for the application of returned goods relief
     121D. —(1) The application of Council Regulation (EEC) No 2913/92[4] (Community Customs Code) and Commission Regulation (EEC) No 2454/93[5] (implementation Regulation) in relation to any VAT chargeable on the importation of goods from places outside the member States is subject to the following prescribed adaptations.

    (2) Regard—


(a) Articles 185 to 187 of the Community Customs Code (returned Community goods and returned compensating products), and

(b) Articles 844 to 856 and Article 882 of the implementation Regulation (returned Community goods and returned compensating products),



as only applying in the case and to the extent of a reimportation to the United Kingdom by the person who originally exported or re-exported the relevant Community goods or compensating products from the VAT territory of the Community.

That VAT territory[6] is the territorial application of Council Directive 77/388/EEC in accordance with Title III of that Directive[7] (territorial application).

    (3) Regard the amount of the relief mentioned in Article 186 of the Community Customs Code (returned Community goods) as reduced by the amount of any unpaid VAT.

    (4) Regard the amount legally owed in Article 187 of the Community Customs Code (returned compensating products) as reduced by the amount of any paid VAT.

    (5) For the purposes of paragraphs (3) and (4)—



(a) "VAT" includes value added tax charged in accordance with the law of another member State (see sections 92(1), 92(2) and 96(1) of the Act[8]);

(b) "unpaid" refers to any part of the VAT charged and due on—


(i) i)a supply or acquisition of the goods in a member State before the reimportation, or

(ii) an importation of the goods from outside the member States before the reimportation,



but repaid, remitted or otherwise not paid;

(c) "paid" refers to any part of the VAT charged, due and paid on—



(i) i)a supply or acquisition of the goods in a member State before the reimportation, or

(ii) an importation of the goods from outside the member States before the reimportation,



and without any actual, or prospect of, repayment or remission;

(d) a sum for which there is or was under the law of a member State an entitlement or right to a deduction or refund within Article 17 of Council Directive 77/388/EEC[9] (origin and scope of the right to deduct) is neither "unpaid" nor "paid".



    (6) In the circumstances described by paragraph (7) or (8)—



(a) Articles 185 to 187 of the Community Customs Code (returned goods), and

(b) Articles 844 to 856 and Article 882 of the implementation Regulation (returned goods),



are excepted from the Community legislation which is to apply as mentioned in section 16(1) of the Act (application of customs legislation in relation to import VAT).

    (7) These circumstances are that—



(a) the reimporter contemplated by those Articles makes a supply of, or concerning, the goods whilst under the inward processing procedure or in the course of, or after, the relevant exportation, re-exportation or reimportation,

(b) the place of that supply for the purposes of VAT is determined by or under section 7 of the Act (place of supply) as being outside the United Kingdom, and

(c) the goods nevertheless are or may be stored or physically used in the United Kingdom by or under the direction of that reimporter or the person to whom that supply is made ("recipient").



For these purposes, "reimporter" and "recipient" include someone connected with either person or both persons as determined in accordance with section 839 of the Taxes Act[10].

    (8) These circumstances are that the goods in question were supplied at any time to any person pursuant to regulations 131 to 133 (supplies to persons departing from the member States) or pursuant to any corresponding provision of the Isle of Man[11].

    (9) For the purposes of the Articles of the Community Customs Code and implementation Regulation mentioned in paragraph (2)—



(a) regard the description of the customs territory of the Community in Article 3 of the Community Customs Code as being substituted with a description of the VAT territory (see paragraph (2));

(b) regard the following references as including a reference to the completion of the formalities referred to in Article 33a(1)(a) of Council Directive 77/388/EEC[12] (formalities relating to entry of goods into VAT territory from territory considered a third territory)—


(i) i)"released for free circulation" in the definition of "Community goods" in Article 4(7), second indent and Article 185(1) of the Community Customs Code;

(ii) "entered" and "declared" for "release for free circulation" in, or for the purposes of, Articles 844(4), 848(1), 848(2), 849(1) and 849(5) of the implementation Regulation;



(c) regard the following references as including a reference to the completion of the formalities referred to in Article 33a(2)(a) of Council Directive 77/388/EEC (or to a declaration under those formalities) (formalities relating to dispatch or transport of goods from Member State to territory considered a third territory)—



(i) i)"customs export formalities" in Articles 844(1), 849(1), 849(2) and 849(3) of the implementation Regulation;

(ii) "export declaration" in Article 848(1) of that Regulation;

(iii) "customs formalities relating to their exportation" in Articles 844(4) and 849(1) of that Regulation;



(d) regard—



(i) i)the definition of "import duties" in Article 4(10) of the Community Customs Code as defining instead VAT charged on the importation of goods from places outside the member States in accordance with the Act[13]; and

(ii) the references to "import duty" and "duty" in Article 185(1), second sub-paragraph, second indent and Article 187 of the Community Customs Code as references to such VAT.



    (10) The references to Council Directive 77/388/EEC in paragraphs (2), (5)(d), (9)(b) and (9)(c) embrace relevant amendments up to and including 6th April 2006 only.".

     5. Regulations 120(2)(a)(v), 120(2)(b)(iv), 124 and 125 are revoked (exceptions for customs returned goods relief and former provisions for VAT returned goods relief).


David Varney

Paul Gray
Two of the Commissioners of Her Majesty's Revenue and Customs

7th March 2006

[2] 1994 c.23; section 96(1) defines "the Commissioners" as meaning the Commissioners of Customs and Excise and "regulations" as meaning regulations made by the Commissioners under the Act. Schedule 11 paragraph 2(1) was amended by section 24 of the Finance Act 2002 (c.23).back

[3] S.I. 1995/2518; relevant amending instruments are S.I. 1996/542, 2000/634, 2001/630, 2001/677, 2002/1142, 2003/1069, 2003/2318, 2004/767.back

[4] OJ No L 302, 19.10.92, p 1 to which there are amendments not relevant to these Regulations.back

[5] OJ No L 253, 11.10.93, p 1; relevant amendments made by Commission Regulation (EC) 75/98 (OJ No L 7, 13.1.98, p 3), Commission Regulation (EC) No 1677/98 (OJ No L 212, 30.7.98, p 18) and the 1994 Act of Accession of the Kingdom of Norway, the Republic of Austria, the Republic of Finland and the Kingdom of Sweden (OJ No C 241, 29.8.94, p 21) as adjusted by Council Decision 95/1/EC (OJ No L 1, 1.1.95, p 1).back

[6] On the date these Regulations are made, the VAT territory is described in HM Customs & Excise (now HM Revenue & Customs) Notice 703 "VAT: Export of goods from the United Kingdom", April 2005, paragraphs 2.8 and 2.9. The Notice is available at http://www.hmrc.gov.uk (in VAT – Library section – VAT, Customs, Excise and international trade duties – Public Notices & Information Sheets – VAT Public Notices).back

[7] OJ No L 145, 13.6.77, p 1; relevant amendments made by Council Directive 91/680/EEC (OJ No L 376, 31.12.91, p 1), Council Directive 92/111/EEC (OJ No L 384, 30.12.92, p 47) and Protocol No 3, Article 2(2), Annex, Part Two to the Act concerning the conditions of accession of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia, and the Slovak Republic and the adjustments to the Treaties on which the European Union is founded (OJ No L 236, 23.9.03, p 940).back

[8] Regulation 2(1) of S.I. 1995/2518 defines "the Act" as the Value Added Tax Act 1994. Section 96(1) of that Act defines "VAT" as value added tax charged in accordance with the Act or, where the context requires, with the law of another member State. Regulation 121D(5)(a) ensures that the latter is properly taken into account for the purposes of returned goods relief.back

[9] OJ No L 145, 13.6.77, p 1; relevant amendments made by Council Directive 91/680/EEC (OJ No L 376, 31.12.91, p 1), Council Directive 92/111/EEC (OJ No L 384, 30.12.92, p 47), Council Directive 95/7/EC (OJ No L 102, 5.5.95, p 18), Council Directive 2000/65/EC (OJ No L 269, 21.10.00, p 44), Protocol No 3, Article 2(2), Annex, Part Two to the Act concerning the conditions of accession of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia, and the Slovak Republic and the adjustments to the Treaties on which the European Union is founded (OJ No L 236, 23.9.03, p 33) and Article 1 of and Annex V, paragraph 1(c) to Council Directive 2004/66/EC (OJ No L 168, 1.5.04, p 35).back

[10] The Income and Corporation Taxes Act 1988 c.1, following the definition in section 96(1) of the Value Added Tax Act 1994 (c.23).back

[11] On the date these Regulations are made the corresponding Isle of Man provisions are regulations 131 to 133 of the Value Added Tax Regulations 1996, Statutory Document No 194/96.back

[12] OJ No L 145, 16.6.77, p 1; relevant amendments in relation to Article 33a made by Council Directive 92/111/EEC (OJ No L 384, 30.12.92, p 47).back

[13] See section 1(1)(c) of the Value Added Tax Act 1994 (c.23).back

[14] Implementing Article 14.1(e) of Council Directive 77/388/EEC (OJ No L 145, 13.6.77, p 1). A transposition note is available from http://www.hmrc.gov.uk or HM Revenue and Customs, Portcullis House, 27 Victoria Avenue, Southend on Sea, Essex SS2 6AL.back

[15] Under section 16(1) of the Value Added Tax Act 1994 (c.23), and by replacing the provisions revoked by regulation 5 of this instrument with a new regulation 121D. The latter includes anti-avoidance rules in paragraphs (6) to (8).back

[16] See the new regulation 121D(8), which includes corresponding schemes in the Isle of Man.back

 © Crown copyright 2006