The Isle of Man is not part of the UK, but under a customs and tax agreement it shares a single VAT area with the UK, so sales to Manx customers are treated exactly like UK sales. The Channel Islands have no VAT and sit outside the UK VAT area, so goods sent to Jersey or Guernsey are exports that can be zero rated with proof of export, and most services to businesses there are outside the scope of UK VAT.

Why is the Isle of Man treated as part of the UK for VAT?

VAT Notice 700, paragraph 4.7.1, says the UK is Great Britain, Northern Ireland and the territorial waters, and does not include the Channel Islands or the Isle of Man. It then says that for VAT purposes the Isle of Man is treated as part of the UK, so the rules for Manx customers and suppliers are the same as for UK ones.

HMRC’s VAT Isle of Man manual (VIOM01000) explains why. UK VAT law does not apply on the island; VAT is charged there under Manx law, the Value Added Tax Act 1996 of Tynwald, which generally parallels UK legislation. The arrangements rest on the Customs and Excise Agreement 1979 between the two governments, implemented in the UK by the Isle of Man Act 1979, and the island has run its own Customs and Excise service since 1 April 1980. The stated aim is a customs union and common indirect tax area, with Isle of Man Customs and Excise following UK policy and practice.

What does that mean when I sell to a customer on the Isle of Man?

In practice you invoice a Manx customer as you would a customer in Manchester. Notice 700 says goods sent from Great Britain to the Isle of Man or the other way do not count as imports or exports for VAT, and VAT Notice 703, paragraph 2.7, says goods sent to the Isle of Man from Great Britain are domestic supplies. You cannot zero rate them as exports. Services to Manx businesses are not outside the scope either: the customer belongs within the common VAT area.

VIOM02100 explains that within the common area a business accounts for VAT in the country where it is registered. A Manx business selling into the UK accounts for VAT to Isle of Man Customs and Excise, and a UK business selling to the island accounts to HMRC.

There are a few local differences. VIOM02800 records that the island applies a 5% rate to accommodation in hotels and similar establishments, including holiday accommodation and camping sites (from 1 October 1994), and to repairs and refurbishment of domestic property on the island (introduced experimentally from January 2000 and made permanent from 16 December 2010). Everything else is charged at the same rates and on the same conditions as in the UK.

Where does a business with a presence in both register?

A person can be registered in either the UK or the Isle of Man, not both. Under VATREG45200, a business established only in the UK registers in the UK, one established only on the island registers there, and a business with establishments in both is registered where the bulk of its supplies are made and where it can be controlled most effectively, decided by HMRC in consultation with the island. For the registration threshold, VATREG45150 says taxable supplies made in the UK and the Isle of Man are added together.

Why are sales to Jersey and Guernsey exports?

Notice 700, paragraph 4.7.3, says there is no VAT in the Channel Islands, and goods passing between the Channel Islands and the UK or the Isle of Man are imported or exported for VAT purposes. VAT Notice 741A, paragraph 2.5, confirms that the Channel Islands are outside the UK for VAT purposes.

Notice 703, paragraph 2.7, says supplies of goods sent to the Channel Islands are regarded as exports and may be zero rated if the export conditions are met. The usual rules apply: the goods must be exported and evidence obtained within 3 months of the time of supply (paragraph 3.5), and a sale delivered to a UK address cannot be zero rated even if the buyer lives in Jersey. The general conditions are explained in our guide to zero rating exports of goods.

What proof of export is needed for the Channel Islands?

Notice 703, paragraph 7.13, sets out two routes:

  • excise goods and goods subject to customs controls, such as restricted goods, always need an electronic export declaration on the Customs Declaration Service
  • at south coast ferry ports in Great Britain, a combined Consignment Note and Customs Declaration (CNCD) with an itemised schedule may be used as evidence for ordinary free circulation goods going to free circulation in the Channel Islands

Goods sent by post need a certificate of posting or the Parcelforce documents described in paragraph 7.6, as for any other postal export. GOV.UK’s export guidance says export evidence must be kept for 6 years. The VAT treatment of the postage itself is covered in VAT on postage and delivery charges.

How are services to Channel Islands customers taxed?

Because the islands are outside the UK, the ordinary place of supply rules apply. Under the general business to business rule, a service is supplied where the customer belongs (Notice 741A, paragraph 6.3), so consultancy, marketing or software development for a Guernsey company is outside the scope of UK VAT, provided you hold evidence that the customer is in business there.

For private individuals, the general rule taxes the service where the supplier belongs, so UK VAT is due. However, section 12 of Notice 741A moves certain services to where the customer belongs when supplied to consumers outside the UK, including the services of consultants, lawyers and accountants, advertising, financial and insurance services, supply of staff and transfers of intellectual property rights. A UK accountant preparing a personal tax return for a Jersey resident individual therefore does not charge UK VAT. See place of supply of services.

What about goods coming from the Channel Islands into Great Britain?

These are imports. GOV.UK guidance says consignments of £135 or less sold directly to customers in Great Britain from outside the UK normally have UK supply VAT charged by the seller at the point of sale, and that low value consignment relief, the old import VAT exemption for goods worth £15 or less, has been removed for Great Britain. That point of sale rule does not apply to consignments from Jersey and Guernsey where VAT is collected and paid to HMRC under the Import VAT Accounting Scheme. Larger consignments follow the normal import rules; see import VAT and customs duty.

How does this work for a mail order business?

Illustration only. A VAT registered retailer in Bristol sells standard rated garden furniture and delivers it as part of the contract.

  • A £1,200 order delivered to Douglas, Isle of Man: a domestic sale, VAT charged at 20% exactly as for a UK customer.
  • A £1,200 order delivered by the retailer’s haulier to St Helier, Jersey: a direct export, zero rated if the retailer holds the CNCD or export declaration evidence within 3 months.
  • A Guernsey hotel buys £5,000 of furniture and sends its own haulier to collect it from Bristol: an indirect export, which can be zero rated only if the additional conditions for indirect exports in Notice 703, paragraph 3.4, are met. GOV.UK suggests taking a deposit equal to the VAT if there is any doubt, refundable when the evidence arrives.

What mistakes come up most often?

  • Zero rating sales to the Isle of Man as if they were exports.
  • Charging UK VAT on goods shipped to Jersey or Guernsey when export evidence was available.
  • Treating the Channel Islands as part of the EU or of the UK. They are neither for VAT.
  • Charging UK VAT to a Channel Islands business customer for general rule services.
  • Applying these rules to goods moving from Northern Ireland, which follow separate rules (Notice 703, paragraph 2.7).
  • Forgetting that zero rated exports to the Channel Islands still count towards taxable turnover; see whether overseas sales count for the VAT threshold.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.