VAT & Deemed Supplies

The recent Yourway Transport VAT case is a fascinating example of how VAT rules can play out in the real world, especially for logistics businesses handling goods they don’t actually own.  

Yourway is a UK-based logistics company that specialises in distributing clinical trial drugs for US biopharmaceutical companies. These drugs would arrive at Yourway's UK depot, be stored under strict conditions, and then shipped - often free of charge - to clinics and hospitals, mostly in the EU. Importantly, YTL never owned the drugs; they simply handled and delivered them.  

The issue arose when Yourway tried to recover around £4.3 million in import VAT paid on these goods. HMRC said no, arguing that because Yourway didn’t own the goods and wasn’t using them for its own taxable supplies, it couldn’t reclaim the VAT.  

The First-tier Tribunal (FTT) had to decide if Yourway could recover this VAT. The key questions were: Did the import VAT count as input tax for Yourway? Was it linked to a taxable supply made by Yourway? And did the rules for agents acting in their own name apply?  

The Tribunal found that, for goods shipped to the EU, Yourway was acting as an agent in its own name. Under UK VAT law, this meant Yourway was treated as if it had made the supply itself - even though it didn’t own the goods. There’s also a rule that treats the removal of goods from the UK to the EU as a taxable supply, even if no money changes hands. Because of these rules, the import VAT was directly linked to a taxable supply, so YTL could recover it for EU-bound consignments.  

However, for goods staying in the UK or going outside the EU, these special rules didn’t apply. In those cases, Yourway’s only taxable supply was its logistics service, and there wasn’t a strong enough link to the import VAT. So, VAT recovery was denied for those consignments.  

This case is a reminder that VAT recovery for agents depends on the specific supply chain and contractual arrangements. For logistics providers, it’s crucial to understand when you’re deemed to be making a supply for VAT purposes - especially if you’re handling goods you don’t own. The Yourway Transport case clarifies the rules, but also highlights the importance of getting the details right.