HMRC Withdraws Zero-Rating Concession for Certain Free-Zone Goods

Summary

• HMRC has updated VAT Notice 48 because the extra-statutory concession allowing zero rating of certain supplies of free-zone goods is no longer available.
• The change was made to section 3.14 of the notice on 25 August 2026.
• Businesses operating through UK free zones should review VAT codes, contracts and procedures that may still refer to the withdrawn concession.

Extended article

HMRC has withdrawn the possibility of relying on an extra-statutory concession to zero-rate certain supplies of goods associated with UK free zones.

The GOV.UK email received on 25 August 2026 states that section 3.14 of VAT Notice 48 was updated because the “Zero-rating of Certain Supplies of Free Zone Goods is no longer possible”. Update from GOV.UK for: Extra Statutory Concessions (VAT Notice 48) [Update fro…oncessions | Outlook], [Update fro…oncessions | Outlook]

Extra-statutory concessions provide relief in defined circumstances where the legislation itself does not provide for remission or repayment, but where HMRC accepts that strict application of the law would produce an unintended result. HMRC explains that these concessions are generally available to businesses meeting their stated conditions but may be amended, restricted or withdrawn.

The withdrawal is potentially significant for businesses that previously referenced the concession in their VAT treatment of transactions involving goods located in a free zone. The revised position means that the VAT treatment must now be established under the applicable statutory provisions rather than under the former concession.

Affected businesses should identify:

1. the precise effective date and transitional treatment stated in the revised notice;
2. the supplies for which the concession was previously used;
3. the statutory VAT treatment that applies after withdrawal;
4. whether VAT determination logic in ERP or customs systems must be changed;
5. whether contracts or price clauses assume zero rating; and
6. whether invoices, credit notes or customer communications are required.

The development is relevant not only to the owner of the goods but also to free-zone operators, customs intermediaries, warehousing providers and finance teams responsible for invoice processing. Customs suspension or free-zone treatment should not automatically be treated as establishing the VAT liability of a domestic supply.

External links

• VAT Notice 48: Extra Statutory Concessions
• Detailed text of VAT Notice 48
• Free Zones Customs, Excise and VAT Regulations 2021

HMRC describes the purpose and general operation of extra-statutory concessions in the detailed notice. [gov.uk], [gov.uk]

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