A. In order to answer this question we first have to determine the place of supply and secondly, if the place of the supply is the UK, consider the UK VAT liability of the supply.
With a few exceptions, the place of supply for business to business services is determined by the location of the customer. Freight transport services fall under this general rule.
Given that your client’s customer is a UK business the place of supply is the UK; however, it does not necessarily follow that VAT is chargeable.
VATA 1994, Sch 4A, para. 9B states:
“Where –
- a supply of services to a relevant business person consisting of the transportation of goods would otherwise be treated as made in the United Kingdom , and
- the transportation takes place wholly outside the member States,
the supply is to be treated as made wholly outside the member states.”
Therefore, as the transportation of the goods in this instance takes place wholly outside the EU the supply is outside the scope of VAT and your client should now issue a credit note for the VAT charged in error. The credit note can be entered in his VAT account and VAT return for the period that he gives it effect by issuing it to the customer and reducing the amount outstanding.
If you have a query on the place of supply of services, why not contact the VAT Advice Line on 0844 892 2470 to discuss it. Our team of experts have a wealth of experience and can also provide a written consultancy service at £180 per hour plus VAT.
