Consultation on draft legislation to change place of supply of freight transport services used and enjoyed outside the EU has recently been launched with comments requested no later than 31 August 2012.

Businesses and charities that receive supplies of freight transport and related services that are performed wholly outside the EU are most likely to be affected and the measure is intended to make the place of supply the place where the services are physically performed and move them outside the scope of UK VAT.

On 1 January 2010 the place of supply of services law changed to a general rule of place where the customer belongs with limited range of exceptions. This meant that supplies of freight transport and related services which took place wholly outside the EU would be taxed in the UK where received by businesses and charities.

On 15 March 2010 HMRC introduced a temporary easement to allow such supplies of freight transport and related services to be supplied where performed “used and enjoyed” and signalled the intention to legislate.

The consultation is available at http://www.hmrc.gov.uk/drafts/freight_eu.htm