From the 01 January 2021, when the transition period ended for the UK leaving the EU, the place of supply of freight transport and associated services changed. Previously the zero-rate applied in respect of transport into and out of the EU. Now it applies in respect of transport into and out of the UK.
When looking at the VAT treatment of supplies you need to take into account the following:
- The place of supply of your services, which follows the status of your customer, and
- The liability of the supply, which follows the place of supply of your services
Customer in business (B2B)
Where supplies of freight transport and related services are to a customer ‘in business’ then the B2B general rule applies, the place of supply being where the customer belongs for the purpose of receiving your supply.
However, where the supply of these services would have a place of supply in the UK under the general rule, but take place wholly outside the UK, the supply is treated as taking place where performed and is therefore outside the scope of UK VAT.
Customer not in business (B2C)
|Journey||Place of supply|
|Transport within the UK||UK|
|Transport between Northern Ireland and EU||where the journey begins|
|All other journeys||Where transport takes place in proportion to the distance covered|
|Ancillary transport related services||where physically performed|
Having established that the place of supply is the UK, the supply of freight transport is standard rated other than:
- Transportation and related services relating to an import to, or export from, the UK
- Any other transport of goods from a place within to a place outside the UK and vice versa
- Handling or storage of ship, train or aircraft cargo (in certain circumstances set out in Notice 744B section 7)
These supplies are zero rated.
Applying for a Duty Deferment Account will be beneficial if your business has numerous batches of imported goods each month and the freight carrier advance payment charge is material.
Deferment accounts will allow you to pay import duty and VAT liabilities on imports with a single direct debit rather than paying for numerous consignments separately.
The payment will be due on the 15th of the following month. If the total monthly duty and VAT liability is more than £10,000 HMRC may ask for a bank guarantee and/or further financial information.
Once the application is approved, the deferment account number should be used on all your customs declarations.
Further information can be obtained here.