Guidance

Freight containers for export from the UK (VAT Notice 703/1)

Find out if you can zero rate VAT if you sell, lease or hire out a freight container for export or removal from the UK to an EU member state or outside the EU.

Detail

This notice cancels and replaces Notice 703/1 (January 2004).

1. Overview

1.1 Information in this notice

This notice explains the special VAT arrangements under which you can zero rate the supply by way of sale, lease or hire of freight containers for export to a place outside the EU or for removal to another EU member state.

It does not cover other supplies related to freight containers, for example, management charges which are subject to VAT under the normal rules (see the VAT guide (Notice 700)).

1.2 The changes

This notice has been updated and restructured but does not introduce any new rules or procedures.

1.3 Who should read this notice

Anyone selling, leasing or hiring out freight containers for removal to another EU member state or export from the EU.

1.4 The law

The legal basis for these arrangements is contained in:

  • The VAT Act 1994, Sections 30(6) and 30(8)
  • The VAT Regulations 1995 (SI 1995/2518) regulations 117(2), 128 and 134

Under UK VAT law, HMRC may specify conditions to prevent evasion, avoidance or abuse. This notice lays down the conditions, which must be met in full, for supplies of containers to be zero-rated.

Parts of this notice have the force of law.

2. Containers, their supply and liability

2.1 Liability of supply of containers

The supply of containers in the UK is, in principle, taxable at the standard rate. The supply of containers for export from the EU or for removal to another EU member state may be zero-rated as long as the conditions set out in this notice are met. See:

Paragraph Subject
3.1 Direct exports
3.2 Indirect exports
4 Removals to other member states
5 Lease or hire
6 Temporary movements
7 Repairs

2.2 Definition of a ‘container’

For VAT purposes, a container is an article of transport equipment (lift-van, moveable tank or other similar structure):

  • fully or partially enclosed to constitute a compartment intended for containing goods
  • of a permanent character and accordingly strong enough to be suitable for repeated use
  • specially designed to facilitate the carriage of goods, by one or more means of transport, without intermediate reloading
  • designed for ready handling, particularly when being transferred from one mode of transport to another
  • designed to be easy to fill and to empty
  • having an internal volume of 1 cubic metre or more

The term ‘container’ includes:

  • the accessories and equipment of the container, appropriate for the type concerned, as long as such accessories and equipment are carried with the container - the term ‘container’ does not include vehicles, accessories or spare parts of vehicles, or packaging
  • air transport containers whatever their internal volume
  • ‘flats’ or ‘Lancashire flats’ (bases with or without head and tail boards, which are designed to carry goods and have the floor area of a 20 foot or 40 foot container), although not strictly covered by this definition we treat them in the same way

Pallets, road vehicles and trailers including those with fixed tanks, are not covered by this notice.

3. Sale of containers for export out of the EU

This section should be read in conjunction with VAT on goods exported from the UK (Notice 703).

3.1 Conditions for zero rating the sale of a container for direct export

For VAT purposes a direct export occurs when the supplier of the container sends it outside the EU and is responsible either for arranging the transport, or for appointing a freight agent.

Supplies of freight containers for direct export may be zero-rated as long as the conditions set out in VAT on goods exported from the UK (Notice 703) are met.

3.2 Conditions for zero rating the sale of a container in the UK for indirect export from the EU

For VAT purposes, an indirect export occurs when an overseas customer or their agent collects, or arranges for the collection of the container from the supplier and then exports it outside the EU.

The next 3 bullets have force of law.

To zero rate the sale of a freight container for indirect export, you must obtain a written undertaking from your customer that:

  • the container will be exported from the EU
  • it will not be used within the EU except for:
    • a single domestic journey before export of the container, on which inland freight may be carried between 2 points within the UK - this is allowable only if the route brings the container reasonably directly from the point of supply to the place where it’s to be loaded with export cargo or exported
    • international movements of goods, which may include a journey within the UK for the purpose of loading or unloading the goods
  • records accounting for the use of the container will be maintained, as specified in paragraph 3.3

The conditions, where met, allow a chain of supplies to be zero-rated.

3.3 Records you must keep if you’re supplied with a zero-rated container for export

The next 3 bullets have force of law.

If you’re supplied with a zero-rated container you must keep sufficient records to satisfy HMRC that:

  • the container has not been used in the EU (except as allowed under paragraph 3.2)
  • it has been exported
  • you’ve sold or leased it to someone else and have obtained the undertaking referred to in paragraph 3.2

4. Conditions for zero rating the sale of containers to VAT-registered customers in other member states

This section should be read in conjunction with VAT Notice 725: the single market.

The next 3 bullets have force of law.

The supply of a container for removal to another EU member state is zero-rated provided that all the following conditions are met:

  • you obtain your EU customer’s VAT registration number (with a 2-digit country code prefix) which you must show on your VAT invoice
  • the container is sent from the UK to a destination in another EU member state
  • within 3 months of the date of supply, you obtain and hold valid commercial documentary evidence that the container has been removed from the UK - examples of acceptable evidence are listed in VAT Notice 725: the single market

If your customer is not registered for VAT in another EU member state, or all of the conditions are not met, you cannot zero rate your supply and you must account for tax on the container in the UK.

If your EU customer collects or arranges for the collection of the container and its removal from the UK, you should confirm with your customer how the container is to be removed, and what evidence of removal will be available to you.

You may also wish to consider taking a deposit from your customer (equal to the amount of VAT you will have to account for if the conditions for zero rating are not met) if you believe you will not be able to obtain evidence of the type listed in VAT Notice 725: the single market.

5. Lease or hire of containers

In working out the liability of these supplies, you will need to refer to the rules set out in Notice 741A: place of supply of services. The place of supply of such services will depend upon the place of belonging of the supplier and the customer.

Note: ‘lease’ should be taken to also mean ‘hire’ for the purposes of this notice.

5.1 Where both you and your customer belong in the UK

You must treat the supply as being made in the UK and must charge VAT on it. Your customer may then recover input tax subject to the normal rules (see the VAT guide (Notice 700)).

The next sentence has force of law.

However, if your customer is to export the container from the EU, you may zero rate the lease of the container provided that you, as the supplier, obtain from your customer a written undertaking (as set out in paragraph 3.2).

5.2 Where your customer belongs outside the territory of the EU

You treat the supply as being made in your customer’s country and so will not charge UK VAT on the supply.

5.3 Where your customer belongs in another EU member state

Where your customer is in business in another EU member state, the supply is treated as being made in your customer’s country, and so you will not have to charge UK VAT. Your customer will normally have to account for VAT in accordance with the ‘reverse charge’ procedure as explained in VAT Notice 741A: place of supply of services. If your customer in another member state is a private individual then the place of supply is where you belong and you will have to charge UK VAT.

Note: for Intrastat purposes, leases lasting over 2 years are considered as a supply of goods, and a Supplementary Declaration is required. Notice 60: Intrastat general guide has more information.

5.4 Where you lease a container from an overseas company

If you, as a UK business, lease containers from companies outside the UK, you’ll normally account for tax under the ‘reverse charge’ procedure. (See VAT Notice 741A: place of supply of services.)

5.5 Liability of incidental charges

Where under the terms of a lease agreement, the costs of incidental services are charged to the lessee, these costs are regarded as part of the consideration for the leasing of the container. This includes items described as repair, delivery, regulator and handling charges, extra rental, or a charge for an option to terminate the lease at an earlier date. The liability of the incidental services will be the same as the liability of the leasing of the container.

6. Temporary movements of containers to other EU member states

The temporary movement of containers from the UK to other member states (whether involved in transporting goods or where the container is on lease or hire to other customers) is not treated as a removal from the UK with a subsequent acquisition in the destination member state.

But, you’ll need to keep commercial evidence that the containers have left the UK and have later returned. In the case of a temporary movement of a container, you will need to make an entry in your Register of Temporary Movements. (See VAT Notice 725: the single market.)

7. Repairs to containers

See VAT Notice 741A: place of supply of services for full information.

You may be able to zero rate work (such as repairs) on a container if either:

  • your customer is an overseas business
  • the container is exported to a place outside the territory of the EU

Containers temporarily imported from outside the territory of the EU solely for repair and so on, may be eligible for relief from payment of import VAT (see Imports and VAT (Notice 702)).

8. Fiscal (VAT) territory of the EU

8.1 Countries and territories within the EU for VAT purposes

The countries are:

  • Austria
  • Belgium
  • Bulgaria
  • Cyprus*
  • Czech Republic
  • Denmark, excluding the Faroe Islands and Greenland
  • Estonia
  • Finland
  • France including Monaco
  • Germany, except Busingen and the Isle of Heligoland
  • Greece
  • Hungary
  • The Republic of Ireland
  • Italy, except the communes of Livigno and Campione d’Italia and the Italian waters of Lake Lugano
  • Latvia
  • Lithuania
  • Luxembourg
  • Malta
  • The Netherlands
  • Poland
  • Portugal, including the Azores and Madeira
  • Romania
  • Slovakia
  • Slovenia
  • Spain, including the Balearic Islands, but excluding, Ceuta and Melilla
  • Sweden
  • United Kingdom and the Isle of Man

*Excluding the United Nations buffer zone and the part of Cyprus to the north of the buffer zone, where the Republic of Cyprus does not exercise effective control.

8.2 Countries and territories outside the EU for VAT purposes

The countries are:

  • Andorra
  • Channel Islands
  • Gibraltar
  • Mount Athos
  • San Marino
  • The Åland Islands
  • The Canary Islands
  • The overseas departments of France (Guadeloupe, Martinique, Reunion, St Pierre and Miquelon, and French Guiana)
  • The Vatican City

All other countries which do not appear in paragraph 8.1.

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Published 6 February 2010