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HMRC internal manual

VAT Place of Supply (Transport)

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HM Revenue & Customs
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Freight transport: Place of Supply from 1 January 2010: supplies performed wholly outside the UK

Introduction

A temporary administrative easement has applied to supplies performed wholly outside the EU since 15 March 2010. It was announced as Revenue & Customs Brief 13/10. The content is reproduced below.

VAT - Place of Supply of freight transport and associated services- used and enjoyed outside the EU.

This Revenue and Customs Brief announces a temporary administrative easement in relation to business to business (B2B) supplies of freight transport (or services closely associated with freight transport) which are physically performed wholly outside the EU.

Who needs to read this?

UK based businesses making or receiving supplies of freight transport (or services closely associated with freight transport) where the services are physically performed wholly outside the EU.

Background

Until 1 January 2010, the place of supply of freight transport and associated services was the country where the activity physically took place, to the extent that it took place there. That meant that supplies physically performed outside the EU were outside the scope of VAT. Transportation related to imports to and exports from the EU could have a place of supply both within and outside the EU and, to the extent they were performed within the EU, the VAT liability was at zero rate.

From 1 January 2010, business to business (B2B) supplies of freight transport and associated services became subject to the new B2B general rule for place of supply of services - where the business customer belongs - regardless of the place of physical performance. This means that, where the customer is in the UK, the place of supply is the UK even if the supply physically takes place wholly outside the EU. As zero- rating only applies to supplies in connection with EU imports and exports, the liability of supplies wholly outside the EU is standard-rated. That means that either the

UK- based customer must perform a reverse charge for the supply (if the supplier is outside the UK) or the supplier needs to account for UK VAT on the supply.

H M Revenue & Customs (HMRC) policy

We have become aware (via UK businesses and charities) that this change has had a real impact, either in terms of increasing administrative burdens (with no revenue impact for the UK) or, in some cases, resulting in a real VAT cost. We recognise that this change in law has produced an unintended anomaly in the treatment of supplies wholly enjoyed outside the EU, which may also be taxed locally in the place of performance.

With immediate effect, where a supply of freight transport (or services closely associated with freight transport) would be treated as supplied in the UK, it will not be treated as supplied in the UK if the use and enjoyment of the services is outside the EU. This administrative easement is being introduced as a temporary measure to allow time for consideration of a more permanent legislative solution.

Past supplies and claims

This treatment applies from 15 March 2010; it is not retrospective.

Further Information

HMRC guidance will be updated to reflect this change.

If you have any further queries, please contact our Helpline on 0845 010 9000, or by email, or by writing to:

HM Revenue & Customs
National Advice Service
Written Enquiries Section
Alexander House
Victoria Avenue
Southend
Essex
SS99 1BD