VAT on international freight and haulage

Transporting goods into or out of the UK is zero rated when the place of supply of the service is the UK, and so are UK legs, handling and storage that form part of the journey from the place of importation to its destination or from its origin to the place of export. Whether the UK is the place of supply depends first on the customer: for a business customer it is where that customer belongs, which can put a haulier’s or forwarder’s service outside the scope of UK VAT altogether.

How do you work out the VAT treatment of a freight job?

HMRC’s VAT Notice 744B sets out a two step test, taken in order. First establish the place of supply, which follows the status of the customer. Then establish the liability, which depends on where the supply is made and what the service is. The zero rates come from Group 8 of Schedule 8 to the VAT Act 1994.

Freight means goods or cargo, mail, documents and unaccompanied vehicles. A freight transport service is supplied when a vehicle, ship, train or aircraft is provided with a driver or crew to carry goods. Hiring a lorry without a driver is a supply of a means of transport rather than freight transport, and hiring one with a driver but carrying nothing is not a transport service either.

Where is a freight service supplied?

For a customer who is in business, freight transport and related services follow the business to business general rule: the place of supply is where the customer belongs for the purpose of receiving the service. The in business test is wide. It applies to customers anywhere in the world and is not limited to customers who are VAT registered. There is one override. A service that would be supplied in the UK under the general rule, but which takes place wholly outside the UK, is treated as supplied where it is performed.

For a customer who is not in business, Notice 744B paragraph 3.3 gives a different rule:

Journey	Place of supply
Transport within the UK	UK
All other journeys	Where the transport takes place, in proportion to distance covered
Ancillary transport related services	Where physically performed

Subcontractors look only at their immediate customer. HMRC’s example is a French company moving goods from Italy to Ireland for a UK business: the French company’s supply is made in the UK. If a UK haulier is subcontracted by the French company to carry the goods from Dover to Holyhead, the haulier’s place of supply is France, because that is where its customer belongs.

When is the transport zero rated?

If the place of supply is outside the UK, the service is outside the scope of UK VAT, although input tax on related costs can still be recovered under the normal rules. The supplier may have to register in the country where the supply is made.

If the place of supply is the UK, the service is standard rated unless a relief applies. Notice 744B paragraph 5.3 lists the zero rates for import and export freight:

• transport of goods from a place in the UK to a place outside it, and the reverse, which reflects item 5 of Group 8;
• transport, handling and storage supplied in connection with the journey from the place of importation to the goods’ destination in the UK, to the extent those services are supplied in the UK;
• transport, handling and storage supplied in connection with the journey from the goods’ origin in the UK to the place of export, again to the extent supplied in the UK.

The last two follow item 11 of Group 8. Destination means the furthest place in the UK to which the goods are consigned at the time of importation, as shown on the consignment note or other import document; if unknown, it is the place of importation. Origin is the place in the UK from which the goods are first consigned for export; if unknown, it is the place of exportation.

Handling and storage of goods carried on a ship, aircraft or train has its own zero rate under item 6, provided the service is performed in a port, on the quayside and in warehousing next to a port, in a customs and excise airport, in an international railway area or in a temporary storage facility. The letting or hire of goods, including cranes and other lifting equipment, is excluded.

What evidence do you need?

Paragraph 5.7 of Notice 744B says you should hold satisfactory commercial evidence that your service is connected with a specific import or export. The main documents are contracts or agreements, consignment notes, bills of lading, certificates of shipment, air or sea waybills and customs declaration forms C88. A combination of correspondence, the customer’s order, payment details, sales invoices and advice notes may also serve. If the paperwork does not tie the job to an identified import or export, zero rating is at risk.

How are freight forwarders treated?

There are no special VAT rules for freight forwarders. Paragraph 9.1 of the notice says each service must be looked at individually, and the first questions are whether you act as principal or intermediary and whether you make one supply or several.

• Acting as principal. A forwarder that buys in transport, insurance and clearance and sells a package will usually make a single supply, taxed according to its overall essential nature. In HMRC’s example of importing goods from the USA for a UK non business customer, the forwarder makes a single supply of international transport, zero rated for the UK part of the journey and outside the scope for the rest.
• Acting as intermediary. Item 10 of Group 8 zero rates the making of arrangements for certain transport supplies. Under paragraph 8.3, an initial intermediary whose service is supplied in the UK is zero rated when arranging space in a qualifying ship or aircraft, the transport, handling or storage of imported or exported goods, or port and airport handling and storage. Other arranging services are standard rated.
• Disbursements. Customs duty paid on the customer’s behalf is a disbursement outside the scope of VAT and should be shown separately. Costs incurred in making your own supply, such as postage and telephone, are part of your consideration even if itemised.

Our guide to agent or principal for VAT explains how to decide which role you are in.

What does this look like in practice?

Illustration only. A UK haulier has three jobs for a UK manufacturer that is in business.

1. Carrying goods from Leeds to Felixstowe, consigned at that time for export to Singapore. The place of supply is the UK and the service is connected with an export from the UK, so it is zero rated.
2. Collecting goods from a warehouse in Daventry that were imported months earlier and stored there with no onward destination known at import, then delivering them to a branch in Bristol. The goods had already reached their destination, so this later movement is standard rated.
3. Moving goods from Lyon to Milan for the same customer. The place of supply under the general rule would be the UK, but the service takes place wholly outside the UK, so it is treated as supplied where performed and is outside the scope of UK VAT.

What goes wrong most often?

• Zero rating after the journey has ended. Paragraph 5.8 is clear that transport after goods reach the destination they were consigned to is not zero rated, and neither are services for goods not yet consigned for export at the time.
• Ignoring the customer’s status. The same journey can be UK standard rated, zero rated or outside the scope depending on who the customer is and where it belongs.
• Treating crane hire as handling. Hire of equipment is outside the item 6 zero rate.
• Overlooking the reverse charge. An overseas supplier’s freight services to a UK business customer are accounted for by the customer under the reverse charge, as Notice 744B section 10 explains.
• Mixing up passengers and freight. Passenger transport has separate rules; see our guide to VAT on passenger transport.

Moving the goods themselves raises separate import VAT and customs questions, covered in our guides to import VAT and customs duty and postponed VAT accounting. Movements involving Northern Ireland have additional rules, explained in our guide to VAT on Northern Ireland goods.

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Related Accountapedia entries

• International transfers of client data
• Passenger transport and VAT zero rating
• UK adopted international accounting standards
• Employer paid travel during public transport strikes
• VAT group registration

Sources

• GOV.UK: Vat on freight transport and associated services notice 744b
• legislation.gov.uk: Act 1994 c. 23, schedule 8

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.