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Zero rating of Freight Transport Costs Public Notice 744b

Since the UK exited the EU, BIFA have received an increasing flow of questions regarding whether the Freight Transport Costs charged to clients can be zero-rated.

The most relevant guidance on this subject is Public Notice 744b https://www.gov.uk/guidance/vat-on-freight-transport-and-associated-services-notice-744b.

In many ways there is no simple single answer. Factors, such as where the “place of supply” is, whether services provided can regarded as making a single supply of international transport or whether the supply is to a business or a private individual, all must be considered.

VAT rules are complex but in general terms the same rules now apply to moving goods between the UK and EU and previously did the UK and the rest of the world. Section 4.1 of Notice 744b clearly states “If the place of supply of freight transport or related services is the UK then the supply is standard rated, except for:

  • the supply of transportation or related services connected with an import into or an export from the UK”

Where Members are arranging a movement from London to Paris and invoicing a UK shipper then there is the potential for the forwarding charges for the international movement to be zero rated.

Much greater care must be taken when acting as a sub-contractor to another freight forwarder based in the UK, when providing for instance customs clearance services for a shipment which was transported from Calais to Dover. In this case the place of supply is the UK and the service provided may be regarded as domestic and not part of the single supply for the entire international movement. Therefore, the main agent would be able to recover the VAT charged by the sub agent, but as the former is party to a contract relating to an import into the UK then they can zero rate the invoice to a UK customer.

VAT is a very complex regime and this information does NOT constitute guidance, if Members have any questions, they should seek the opinion of a suitably qualified accountant or solicitor.

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