My client supplies freight transport and associated services. They supply these services to customers that are in business and customers not in business.
Are there any changes to the liability of their supplies following the end of the transition period for Brexit?

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 must look at 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.

Examples are set out in VAT Notice 744B section 3.2

Customer not in business (B2C)

JourneyPlace of supply
Transport within the UKUK
Transport between Northern Ireland and EUwhere the journey begins
All other journeysWhere transport takes place in proportion to the distance covered
Ancillary transport related serviceswhere physically performed

Examples are set out in VAT Notice 744B section 3.3

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.
VAT Notice 744B has been updated to reflect the changes from 01 January 2021.

In association with Croner Taxwise

Image designed by Freepik