VATPOSTR3620 - Freight transport: Place of Supply from 1 January 2010: recipient in business

Customer in business

From 1 January 2010 the place of supply of most services (including transportation and ancillary services) to a customer that is in business (a relevant business person) for the purposes of receiving the supply is where the customer belongs - this is called the ‘general rule’. It is not material whether the customer belongs in the UK, or another country where the services are physically performed or whether the customer is VAT registered or not. However, where services of transportation of goods and ancillary services are supplied to business customers and takes place outside the United Kingdom, the place of supply is outside the scope of UK VAT. The VAT Place of Supply of Services manual gives detailed guidance as to how this works and what evidence may be required.

UK supplier to UK business customer

Where a UK supplier supplies freight transport or related services in respect of a movement of goods the service is normally treated as being supplied in the UK and VAT is accounted for in the normal way. However, where the service is supplied wholly outside the UK it is treated as outside the scope of UK VAT.

For example a UK supplier transports goods for a UK business from Great Britain to Northen Ireland (or vice versa); the place of supply is the UK. If the same UK supplier supplies freight transport services to a UK business customer, and the goods are moved from the UK to the USA the place of supply is also the UK.

UK supplier to overseas business customer

On the other hand, if the transport from the UK to the USA, or the movement from Great Britain to Northern Ireland was for a French customer the place of supply would be outside the UK.

Supplies of transport and related services in the UK may be zero-rated, see VTRANS

Non-UK supplier to UK business customer

When a UK business customer receives supplies of freight transport or related services (not wholly performed outside the UK) from a supplier who belongs outside the UK, the supply is treated as taking place in the UK and the UK recipient of the services must account for VAT using the reverse charge procedure. If the recipient is a business that is not VAT registered then the value of the supply received counts towards the registration threshold. Further information on this can be found in the guidance covering VAT registration VATREG.