Find out the 'place of supply' rules for passenger transport and the VAT zero rating of public passenger transport if you supply it in the UK.
This notice applies to supplies made on or after 1 January 2021.
It applies to supplies made in both Great Britain (England, Scotland and Wales) and Northern Ireland unless otherwise stated. References to UK should be construed accordingly.
1.1 What this notice is about
This notice explains the place of supply rules for passenger transport and the zero rating of public passenger transport supplied in the UK.
1.2 Passenger transport services
Passenger transport services are supplied when a vehicle, ship or aircraft is provided together with a driver or crew, for the carriage of passengers. This may also include any incidental services.
‘Vehicle’ includes trains and other land-based transport.
If you hire a vehicle, ship or aircraft to a customer:
- without a driver or crew, then you do not supply passenger transport services, but a means of transport
- with a driver or crew but do not transport anyone or anything anywhere, then you do not supply a transport service
You can find further information on hiring a vehicle in Ships, trains, aircraft and associated services (VAT Notice 744C).
2. VAT treatment of passenger transport services
2.1 The liability of passenger transport services
Passenger transport services supplied in the UK, including its territorial waters, can be either:
- zero-rated — but you must keep evidence to substantiate zero rating
You can zero rate the transport of passengers:
- from a place within to a place outside the UK or the other way around to the extent those services are supplied in the UK — see section 3
- in any vehicle, ship or aircraft designed or adapted to carry not less than 10 passengers to the extent those services are supplied in the UK — see section 4
- on any scheduled flight — see section 5
- with disabilities in some cases — see section 6
- by the Post Office company — see section 7
You cannot zero rate the transport of passengers:
- to, from or within a place of entertainment, recreation or amusement or a place of cultural, scientific, historical or similar interest, if you’re also the person supplying the right of admission to that place — see section 8
- in any vehicle between a car park and an airport terminal, if you’re also connected with the person providing the car parking — see section 8
- in an aircraft when the flight is advertised or held out to be for the purpose of providing entertainment, recreation or amusement, the experience of flying or the experience of flying in a particular aircraft — see section 8
Reduced rate transport
You can use the reduced rate for the transport of passengers in a cable-suspended chair, bar, gondola or similar vehicle designed or adapted to carry not more than 9 passengers — see section 4.
You cannot used the reduced rate for transport of passengers to, from or within a place of entertainment, recreation or amusement or a place of cultural, scientific, historical or similar interest, if you’re also the person supplying the right of admission to that place — see section 8.
2.2 Services that are not regarded as transport of passengers
The following are not regarded as transport of passengers:
- donkey rides and similar rides
- novelty rides on miniature and model railways, ghost trains, roundabouts, dippers and other fairground equipment and similar attractions
- the hire of a vehicle without a driver
- the service of a driver alone
- the supply of any vehicle with or without crew for a non-passenger service, for example to make a film or carry goods
2.3 Transport of vehicles on ships, trains or other forms of transport
If you transport or ferry vehicles on ships, trains or other forms of transport you’re supplying passenger transport services when your transport meets the conditions at paragraph 2.1 and:
- transports the vehicles with passengers, for example a coach or bus, it does not matter whether or not you’re charging them the private car rate — the supply will be zero-rated
- transports vehicles with drivers or passengers charged under the private car rate, including motorcycles, cars, caravans and trailers — this supply may be zero-rated
- transports small commercial vehicles charged under the private car rate whether carrying passengers or freight — this supply may be zero-rated
2.4 When to treat the transport of vehicles on ships, trains or other transport as freight transport
You’ll be providing freight transport if:
- you transport or ferry vehicles on ships, trains and so on
- the vehicles are unaccompanied or without passengers
You can find further information on the liability of freight in VAT on freight transport and associated services (Notice 744B).
2.5 Supplying passenger transport in a vehicle ship or aircraft with a driver or crew who are not your employees
In order to treat these supplies as passenger transport, you must show that you’re supplying the vehicles with a driver or crew.
You can only do this if you keep all the following records:
- current information for each driver or crew member in your register, including names — addresses and driving licence information
- references which have been requested and taken up for each of the drivers or crew members
- assessments for the drivers or crew members, showing they have been trained for the vehicle, ship or aircraft concerned
- details of any identity cards showing that the drivers or crew members are working for you
- evidence of a ‘job description’ for the drivers or crew members
- evidence that these records are regularly updated at least annually for example
- evidence that you’ve some control over the driver or crew member allocated to the various journeys made — this means you should be able to show that you’ve approved the driver or crew member for a particular journey and you decide over the choice of the driver or crew member used
3. Place of supply of passenger transport
3.1 How the place of supply of passenger transport is determined
The place of supply of passenger transport services is determined according to where the transport physically takes place. If it takes place:
- inside the UK, the supplies are all within the scope of UK VAT
- both inside and outside the UK, the element that takes place within the UK is within the scope of UK VAT — see paragraph 3.2
- visiting cruise ships from outside the UK that do not pick up or drop off passengers in the UK can be treated as outside the scope of UK VAT
- outside the UK the supplies are outside the scope of UK VAT — see paragraph 3.3
3.2 The VAT liability of passenger transport that takes place both inside and outside the UK
Passenger transport that takes place both inside and outside the UK is zero-rated to the extent the transport takes place within the UK, irrespective of the carrying capacity of the vehicle, ship or aircraft. It applies to both:
- single and return journeys, as long as the transport is scheduled to stop, put-in or land in another country
- journeys to or from oil rigs situated outside UK territorial waters
It does not apply to:
- journeys which begin and end in UK but take place partly outside the UK (without a scheduled stop), such journeys are considered to take place wholly within the UK, even if they’re part of a longer journey involving travel to or from another country
- certain passenger transport services in connection with recreational activities and airport car parks — see section 8
- where a ferry transports passengers from Northern Ireland to Scotland (or the other way around), the supply is treated as taking place wholly in the UK, even though part of the journey might take place in international, or Irish waters
- where a ferry transports passengers from Liverpool to Dublin the part of the journey that takes place within UK waters is zero-rated, the part of the journey outside UK waters is outside the scope of UK VAT
- where a coach transports passengers from Northern Ireland to France, crossing the Irish sea between Ireland and Wales the section of the journey that takes place transiting Ireland is deemed to take place wholly within the UK
- cruise ship from Norway calls at Aberdeen, then sails to Belfast before returning to Norway — the entire voyage is outside the scope of UK VAT unless passengers can leave or join the cruise in the UK
3.3 Transport services that occur outside the UK
If the transport services occur in countries outside the UK, you may be liable to account for any tax in those countries that is applicable on these services.
If these occur in international airspace or waters, then you may not have to account for any tax on that part of the supply in any country.
3.4 If you provide passenger transport in the UK but you belong outside the UK
If you belong outside the UK, you have 2 options:
If you’re not registered for VAT in the UK and your customer is registered for UK VAT, then your customer can account for VAT on your supplies under the reverse charge procedure — see Place of supply of services (VAT Notice 741A).
If you’re not registered for VAT in the UK and your customer is not registered for UK VAT, then you’re liable to account for the VAT in the UK and you must register for VAT in the UK, if your supplies exceed the VAT registration threshold — see Who should register for VAT (VAT Notice 700/1).
3.5 How the supply of a pleasure cruise is treated
If you provide a pleasure cruise, it may be treated as a single supply of passenger transport. If so, the element that takes place in the UK falls within the scope of UK VAT — see section 10.
4. Reduced and zero rate passenger transport
4.1 Circumstances where you can zero rate domestic passenger transport
You can zero rate domestic passenger transport in any vehicle, ship or aircraft that has at least 10 seats, including those for the driver and crew, unless the supplies are exceptions from the zero rates — see section 8.
The zero-rated domestic passenger transport will also include:
- pleasure cruises
- cliff lifts
- excursions by coach or train (including steam railways)
- horse drawn buses
- mystery coach or boat trips
- sightseeing tours
- the transport element of park and ride schemes designed to reduce traffic congestion in city centres
- the transport of parachutists or divers as long as it’s only transportation that’s provided
4.2 Circumstances where you can reduce rate domestic passenger transport
You can reduce rate domestic passenger transport in any cable suspended vehicle that has less than 10 seats, including those for any operating staff.
‘Cable suspended vehicle’ means a chair, bar, gondola or similar that’s suspended from a cable as its sole means of support. It does not include systems where vehicles are towed by means of a cable and supported from below.
Where the system transports passengers from one point to another, they’re covered by the reduced rate, examples are:
- cable cars
4.3 Payments from an individual or a group of passengers
It does not make a difference whether you get payment from an individual or a bulk payment in respect of a group of passengers. The reduced or zero rate applies.
4.4 Main contractor or sub-contractor
It makes no difference if you’re the main contractor or sub-contractor, the reduced or zero rate applies to both and it does not matter who your customer is.
4.5 What the provision covers
The provision is not confined to regular passenger transport services but applies to any services which meet the conditions set out in paragraph 2.1.
4.6 If you supply transport in vehicles, ships or aircraft with a carrying capacity of less than 10 passengers
If the carrying capacity of the vehicle, ship or aircraft is less than 10 passengers, then the passenger transport is standard-rated unless it can be reduced or zero-rated under the conditions:
- set out in section 3, section 5 and section 7
- set out in paragraph 4.2
- for disabled passengers, in specially adapted vehicles — see section 6
4.7 Transport in taxis limousines and hire cars
The provision of transport in taxis and hire cars is standard-rated unless the vehicle has 10 or more seats. The number of people a limousine is licensed to carry does not determine the liability, the physical capacity of the vehicle does.
You can find further information in How VAT applies to taxis and private hire cars (VAT Notice 700/25).
4.8 Using a variety of different sized vehicles to supply passenger transport
A supply can only be zero-rated if the vehicle actually used has 10 or more seats at the time of supply. If you have to substitute a smaller vehicle (for example, a large coach is unavailable) then the liability will depend on the capacity of the vehicle actually used.
If you use a mixture of vehicles to make a supply you’ll need to make an apportionment to calculate how much VAT is due.
4.9 If you’re an agent making arrangements for the supply of passenger transport
You may zero rate your supply when making certain arrangements for a supply of zero-rated passenger transport. You can find further information in Travel agents (VAT Notice 709/6).
4.10 If you’re an agent who buys in passenger transport and resells it as principal
If you buy in passenger transport and resell it as principal, you must use the Tour Operators Margin Scheme.
5. Scheduled flights
5.1 What a scheduled flight is
A scheduled flight is one that runs either according to a published timetable or so regularly or frequently as to constitute a recognisable systematic series of flights.
5.2 VAT liability of scheduled flights
Zero rating applies to all scheduled flights irrespective of the carrying capacity of aircraft.
5.3 How to account for VAT on inclusive tours
If you provide transport as part of a package or inclusive tour, which includes facilities, you’ve bought in from third parties, you’re required to account for VAT under the Tour Operators Margin Scheme. For this purpose, facilities include:
- hotel accommodation
- admission to events
If you supply transport to, from or within a place of entertainment or interest see section 8.
6. Transport of disabled passengers
6.1 How to treat vehicles constructed or modified for people with disabilities
If you operate a vehicle, which has been constructed or modified to cater for the special needs of people with disabilities, your supplies may be zero-rated.
For zero rating to apply you must meet all the following conditions.
The vehicle would be able to have 10 or more people conventionally seated.
It has a carrying capacity of less than 10 persons when equipped with conventional seats or facilities specifically designed for the use of passengers with disabilities or both.
The vehicle’s carrying capacity has not been reduced for any other reason than to provide facilities for passengers with disabilities (for example, to carry goods) even if the vehicle is later equipped for the carriage of disabled persons.
- a standard vehicle is normally fitted with 10 seats and 6 are removed and replaced with fitting equipment for 2 wheelchairs and a lift — this would satisfy the conditions for zero rating
- the same vehicle has a further seat removed and replaced with a storage unit, as the vehicle would now have a nominal capacity of 9 the conditions for zero rating no longer exist
6.2 Reclaiming input tax on a vehicle modified to carry less than 10 disabled passengers
You can only reclaim the input tax on the vehicle if it would originally have had 12 or more seats. You can find further information in VAT relief on adapted motor vehicles for disabled people and charities (Notice 1002).
6.3 Ambulance services
Ambulance services are exempt from VAT. You can find further information in VAT liability of health institutions supplies (Notice 701/31).
7. Passenger transport by a universal service provider
A universal service provider means a person who provides a universal postal service (within the meaning of Part 3 of the Postal Services Act 2011), or part of such a service, in the UK. At the time of publication of this notice, the sole designated universal service provider in the UK is Royal Mail.
Royal Mail provide passenger transport services as part of its services to the community. These services are zero-rated irrespective of the type of vehicle or its carrying capacity.
8. Standard-rated passenger transport and related services
8.1 When to charge VAT at the standard rate
If you supply any of the following transport services, you must charge VAT at the standard rate:
- where the supply of transport services includes the right of admission to fair-grounds, museums, stately homes, theme parks, safari parks, water parks, piers, zoos and other places of entertainment, historic or cultural interest (transport services are standard rated whether you charge an overall admission price, which includes transport, or make a separate charge for the transport)
- the right to use any vehicle to, from or within the places in the first bullet, where the transport and admission are supplied by the same or by connected persons — this includes rides such as those on monorails, cable cars and boats
- transport in any motor vehicle between a car park or its vicinity and an airport passenger terminal or its vicinity, when the car parking facilities are supplied by you, or by a connected person — see paragraph 8.3
- flights held out as being for entertainment or the experience of flying and not primarily to transport people from one place to another — see paragraph 8.4
8.2 How to treat supplies of transport services to a place where the public have free access
A supply of transport services to places where the public enjoy totally free access is normally zero-rated, for example:
- national parks
- seaside resorts
- historic towns and villages
- geographical areas such as the Norfolk broads
- canals and lakes
But zero rating does not apply when the supply of transport services to these places also includes the right of admission to the places mentioned in the first bullet of paragraph 8.1.
8.3 Connected persons
Examples of connected persons are:
- your husband or wife
- your relatives
- your husband’s or wife’s relatives
- your business partners and their husbands, wives and relatives
- a company that you control, either by yourself or with any of the persons listed in these bullets
- the trustees of a settlement of which you’re a settler, or of which a person who is still alive and who is connected with you, is a settler
Relative means a:
- ancestor or lineal descendant
It does not include:
8.4 Types of flights that would be standard-rated
The following examples are standard-rated, although the list is not exhaustive:
- ‘fear of flying’ flights
- airship rides
- ‘flights to nowhere’ and similar pleasure flights where the aircraft returns to the airport of departure without an advertised landing and disembarkation of passengers at another airport
- hot air balloon rides
8.5 Providing independent transport services to a place of entertainment or interest
Transport to, from or within a place of entertainment or cultural interest when provided independently from an operator of such a place and such services, remains zero-rated (subject to the normal conditions given at section 4).
Typical examples include:
- a trip by coach or rail to a football ground
- a coach excursion to a theme park
- ferries, canal boat trips and other round trips or excursions by boats, without other facilities, on the open sea or other waterways to which the public have free access
9. Incidental and ancillary services to passenger transport
9.1 How to treat other services provided to passengers
As well as providing passenger transport, other services are sometimes provided to passengers. These can be either:
- incidental to the supply of passenger transport — see paragraphs 9.2 and 9.3
- ancillary to the supply of passenger transport — see paragraph 9.4
9.2 Incidental services
These are services that are provided to passengers as part of the single transport services. These may include:
- accompanied domestic pets
- accompanied luggage, including cycles and prams and excess luggage
- accompanied vehicles and trailers
- airport passenger charges and passenger load supplements
- duplicate season tickets
- Pullman supplements
- seat reservations
- sleeping berths, cabin on ships (if provided in the course of ordinary transport) — you can find further information in Tour Operators Margin Scheme for VAT (Notice 709/5)
9.3 How to treat incidental services
These are part of the single supply of passenger transport services. They’re often provided at no extra cost. Where an additional charge is made to the passenger it’s regarded as a supplement to the fare and either:
- zero-rated if the fare is zero-rated
- standard-rated if the fare is standard-rated
9.4 How to treat ancillary services
These are not part of the single supply of passenger transport services but are supplied separately. These are normally standard-rated. They may include:
- meals, snacks, sandwiches and drinks provided in the course of catering and supplied separately, you can find further information in Catering, takeaway food (VAT Notice 709/1)
- car parking, you can find further information in Land and property (VAT Notice 742)
- cycle storage facilities
- left luggage facilities
- lost property facilities
- the right to enter a platform (platform tickets)
- transportation of unaccompanied luggage, vehicles and trailers
9.5 Airline perks
This includes airline perks, as well as those examples in paragraph 9.4 it will include such things as restaurant meals, theatre trips and other entertainment provided during a trip or holiday, hotel accommodation and car hire other than as specified in paragraph 9.4.
These perks should be treated as separate supplies and taxed accordingly. This list is not exhaustive. The provision of perks, which are not allowable, may mean the airline is liable to use the Tour Operators Margin Scheme.
9.6 Passenger perks supplied with passenger transport
Passenger perks offered by transport operators may be treated as part of a supply of passenger transport as long as the perks meet all the following conditions:
- they’re included in the ticket price for the class of travel concerned, with no discount if the perk is not taken up
- they form an integral part of the transportation — see paragraph 9.7
- they’re not gifts of goods — except where currently permitted for example in-flight catering, toiletries
- they’re restricted to 1 for each customer, although the customer may be offered a choice of options
9.7 Which perks to treat as an integral part of the transportation
The following examples are treated as an integral part of the transportation:
- limousine transport to or from an airport
- up to 2 days car hire for a one way ticket (4 days for a return ticket)
- car parking
- hotel or similar accommodation as long as it’s for no more than 1 night’s stay with breakfast and there is a direct connection with the zero-rated travel, for example, where it’s necessary to catch a connecting flight or it’s required for the night prior to take off or on the night after landing
9.8 ‘Wine and dine’, ‘steam and cuisine’ and other similar journeys
Depending on the circumstances ‘wine and dine’, ‘steam and cuisine’, disco cruises, dinner cruises, wedding reception cruises and other similar journeys may be:
- treated as mixed supplies
The criteria used for cruises is detailed in paragraphs 10.4 and 10.5.
9.9 Independent public passenger transport to airports
Independent public passenger transport to airports by train, tube, bus or coach, the transport element of urban park-and-ride schemes and journeys from station car parks by public passenger transport are outside this provision and are considered under paragraph 2.1.
9.10 Air Passenger Duty
Air Passenger Duty is charged to the airline and many airlines will charge this on to passengers as a discrete amount. For VAT purposes this is to be treated as part of the fare for the flight and will be taxed at the same rate of VAT as the fare.
10.1 How to determine the treatment of cruises for passenger transport purposes
This section covers sea and river cruises provided from your own resources. If they’re bought in from a third party and re-supplied, you’ll find further information in Tour Operators Margin Scheme for VAT (Notice 709/5).
10.2 When you’re seen as providing a cruise from your own resources
You’re regarded as providing a cruise from your resources if you meet one of these conditions:
- you use your own ship
- you hire a vessel from the owner for a period of 2 years or more, whether only with deck and engine crew or with both deck and engine crew and ‘hotel’, domestic and catering crew — the vessel need not necessarily be in service continuously throughout the period but the owner must not have the right to use the vessel to make supplies to any other customer during the period
- you hire a vessel from the owner including deck or engine crew but employ or engage your own ‘hotel’, domestic or catering staff
10.3 How to treat the supply of a cruise
If you provide a cruise, it may be treated as either:
- a single supply of passenger transport — see paragraph 10.4
- a number of supplies — see paragraph 10.5
10.4 How to decide whether a cruise is a single supply of passenger transport
All the following conditions must be met:
- the essential nature of the supply is passenger transport, which is supported by the evidence provided
- all elements of the cruise are integral and it would be neither practicable nor realistic to separate them
- the cruise is held out for sale at a single price with no specific charges or discounts for particular services taken or not taken up
10.5 How to decide if the cruise consists of multiple supplies
All the following conditions must be met:
- different elements of the cruise are the subject of separate negotiation and customer choice
- there are separately identifiable obligations on the supplier, and separate charges
- separate supplies are not integral to the main supply and could be omitted
- it must be practicable, reasonable and realistic to separate the elements of the cruise
10.6 How to treat a separate supply of any of the individual elements
Where separate supplies of any of the individual elements are made, they should be taxed according to their respective liabilities. For example, a separate supply of catering is standard-rated when supplied in the UK.
10.7 What you should do if a single charge includes a mix of zero-rated, reduced-rated and standard-rated elements
We’ll accept a reasonable apportionment if elements of different VAT rates are included within a single charge.
11. Goods sold on board ferries between Great Britain and Northern Ireland
These goods will continue to be taxed as UK domestic supplies, UK VAT will be due and will be accounted for on the seller’s UK VAT Return.
A passenger who takes goods bought on board off the ship is not required to make any declaration in either Great Britain or Northern Ireland.
On board supplies will be treated as taking place outside the UK, and outside the scope of UK VAT if goods are sold on journeys that visit the UK as part of a voyage to or from third countries.
If a passenger lands they will have to declare any goods bought on board to customs under the normal passenger rules.
Where goods are sold on journeys between Northern Ireland and an EU member state, these will be taxed in the place of departure.
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