The measure

This measure was previously announced at Budget 2010.

This measure will implement changes to the VAT treatment of supplies relating to natural gas and of heat and cooling.

Currently gas supplied via the natural gas distribution system is treated as supplied where a wholesale customer is established or where it is consumed with UK VAT registered customers accounting for VAT on supplies received from suppliers established abroad under the reverse charge. There are currently no rules which specifically govern the application of VAT to supplies of heat and cooling.

The rules, which will be extended to apply to heat and cooling supplied through networks, are to be amended so as to:

• extend their scope to cover supplies in all categories of the natural gas pipeline;
• limit their scope to supplies involving natural gas pipelines located in the EU or linked to such pipelines; and
• extend the relief from import VAT to all natural gas imported via a network (including liquefied natural gas by tanker).

Who will be affected?

Suppliers, importers and VAT registered recipients of natural gas, heat and cooling.

When?

The measure will have effect from 1 January 2011.