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HMRC internal manual

VAT Transport

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Transport: Freight transport and related services - the Azores and Madeira

The Law

The law relating to the liability of freight transport services to, from, or between the Azores and Madeira is in the VAT Act 1994, Schedule 8, Group 8, item 13.

  1. Intra-Community transport services supplied in connection with the transport of goods to or from the Azores or Madeira or between those places, to the extent that the services are treated as supplied in the United Kingdom.

Note (9) “Intra-Community transport services” means-

  1. the intra-Community transport of goods within the meaning of the Value Added Tax (Place of Supply of Services) Order 1992;
  2. ancillary transport services within the meaning of the Value Added Tax (Place of Supply of Services) Order 1992 which are provided in connection with the intra-Community transport of goods; or
  3. the making of arrangements for the supply by or to another person of a supply within (a) or (b) above or any other activity which is intended to facilitate the making of such a supply,

and, for the purpose of this Note only, the Azores and Madeira shall each be treated as a separate member State.

Item 13 is based on Principal VAT Directive (Directive 2006/112) Article 142

142 Member States shall exempt the supply of intra-Community transport of goods to and from the islands making up the autonomous regions of the Azores and Madeira, as well as the supply of transport of goods between those islands

Note: from 1/1/2010 the Place of Supply of Services Order 1992 was repealed, and the terms are now within the VAT Act 1994, Schedule 4A, items 12 and 13 (see VATPOSTR3000). HMRC do not think the fact that this Note has not been updated will have any material effect on the application of the law but in cases of difficulty contactSupply Policy Team.

Background

This item was introduced into Group 8 of Schedule 5 to the VAT Act 1983 with effect from 1 January 1993. It implemented a Article 28 C(C) of the Sixth Directive [now Article 142 of Directive 2006/112] which had been inserted for economic reasons on the accession of Portugal to the EC. Under the place of supply rules operating from 1 January 1993, freight transport and related services to, from or between the Azores and Madeira, supplied by a UK supplier to VAT registered customers in other Member States, are supplied in the recipient’s country and are outside the scope of UK VAT (seeVATPOSTR3000). Where such supplies are made by a UK supplier to a UK customer, or by a supplier in another Member State to a VAT registered customer in the UK, their place of supply is the UK, but they are zero-rated under item 13.

Zero-rating under Item 13

This item provides relief for the transport of goods -

  • between the territories of the Azores and Madeira; or
  • to or from either territory to a place elsewhere in the EC,

to the extent that the transport is supplied in the UK.

By virtue of legal Note (9) to Group 8 this item also zero-rates ancillary transport services provided in connection with such transport, and the services of an intermediary in arranging a supply which is zero-rated under this item.

The Portuguese territories of the Azores and Madeira are treated as separate Member States for the purposes of this relief.