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HMRC internal manual

VAT Transport

Transport: Making arrangements for a supply of freight transport or related services


The law applying the zero-rate to services of making arrangements for a supply of freight transport or related services is in the VAT Act 1994, Schedule 8, Group 8, item 10.

  1. The making of arrangements for -

(b) the supply of any service included in items 1 and 2, 3 to 9 and 11;

Item 10(b) is based on the Principal VAT Directive (Directive 2006/112) Article 153

Member States shall exempt the supply of services by intermediaries, acting in the name and on behalf of another person, where they take part in the transactions referred to in Chapters 6, 7 and 8, or of transactions carried out outside the Community.

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Item 10(b) of Group 8 zero-rates the services of an intermediary, such as an agent or broker, making arrangements for the supply of a service, which is itself zero-rated under items 1 and 2, 3 to 9, and 11 of Group 8, between two principals. Therefore, if a supplier arranges a supply of transport, handling or storage services which is itself zero-rated under these items, his supply as an intermediary is also zero-rated.

Such intermediary services can be supplied to either the supplier or the customer or both. The general treatment of agents for VAT purposes is explained in V1-5 Taxable person chapter 2, Section 2A

Item 10(b) does not apply if an intermediary:

  • arranges a supply of goods;
  • buys in and resells services as a principal; or
  • acts for another agent as sub-agent. Agreements between principals and agents sometimes state that any sub-agent appointed by the agent is also an agent of the principal, even though he may have no knowledge of the appointment. HMRC do not accept that such an arrangement creates a genuine agency relationship between the sub-agent and the principal.

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In the non-VAT case of Garnac Grain Co Inc v H.M.F Faure and Fairclough (1968 AC 1130n, 1967 2 All ER 353), Lord Pearson said: The relationship of principal and agent can only be established by the consent of the principal and agent.

He went on to say that they will be deemed to have consented if they agree to what in law amounts to such a relationship even if they do not recognise it themselves and even if they have professed to disclaim it. 

In either case, there must be a specific agreement between the two parties concerned for an agency relationship to exist.

  • provides a service which has its place of supply outside the UK (see VATPOSTR for the position of intermediary services in these circumstances).
  • provides intermediary services in respect of a supply of intra EC freight transport to, from or between the Azores or Madeira, (see VTRANS100000).