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HMRC internal manual

VAT New Means of Transport

From
HM Revenue & Customs
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Law and definitions

A new means of transport is any vehicle, boat or aircraft intended to transport passengers or goods from A to B. For this purpose, the driver of a single-seat means of transport is a ‘passenger’.

The legal basis is given in the VAT Act 1994 Section 95.

### Law ### Further information
   
95(1) In this Act … “new means of transport” means …  
(a) any ship exceeding 7.5 metres in length; See Definition of length for ships below.
(b) any aircraft, the take-off weight of which exceeds 1550 kilograms; (see also Definition of weight for aircraft below) See Definition of weight for aircraft below.
(c) any motorised land vehicle which—  
    (i) has an engine with a displacement or cylinder capacity exceeding 48 cubic centimetres; or

    (ii) is constructed or adapted to be electrically propelled using more than 7.2 kilowatts.                                                                | See Definition of motorised land vehicle below.           | | 95(3) For the purposes of this Act a means of transport shall be treated as new, in relation to any supply or any acquisition from another Member State, at any time unless at that time—                                                                                                                           |                                                           | | (a) the period that has elapsed since its first entry into service is—

    (i) in the case of a ship or aircraft, a period of more than 3 months; and

    (ii) in the case of a land vehicle, a period of more than 6 months; and                                                                     | See Legal definition of ‘first entry into service’ below. | | (b) it has, since its first entry into service, travelled under its own power—

    (i) in the case of a ship, for more than 100 hours;

    (ii) in the case of an aircraft, for more than 40 hours; and

    (iii) in the case of a land vehicle, for more than 6000 kilometres (3729 miles). |                                                           |

This reflects Article 2(2) of Directive 112/2006 (the Principal VAT Directive).

Definition of length for ships

Ships supplied as new means of transport must exceed 7.5 metres (24 feet 7 inches) in length. The specification of a vessel may quote several different length measurements, for example waterline length, hull length, length overall. The qualifying criterion for a ship supplied as a new means of transport is length overall.

Definition of weight for aircraft

Take-off weight is the maximum weight at which the aircraft is permitted to takes off. This weight can be found in the certificate of airworthiness.

Definition of motorised land vehicle

A motorised land vehicle is any vehicle suitable for use:

  • carrying passengers (including a solo driver) or
  • goods

on

  • public roads
  • private land
  • off-road (e.g. on private land)

Examples include:

  • cars,
  • vans,
  • lorries,
  • tractors and agricultural machinery,
  • motorcycles (including off road variants) and quad bikes,
  • construction plant (including tracked vehicles).

Legal definition of ‘first entry into service’

In accordance with Article 2(2)(b) of Directive 112/2006 (the Principal VAT Directive), the UK has set down conditions for establishing first entry into service in Regulation 147 of the VAT Regulations 1995 (SI 1995/2518):

147(1) … a means of transport is to be treated as having first entered into service–

(a) in the case of a ship or aircraft—

(i) when it is delivered from its manufacturer to its first purchaser or owner, or on its first being made available to its first purchaser or owner, whichever is the earlier, or

(ii) if its manufacturer takes it into use for demonstration purposes, on its being first taken into such use, and

(b) in the case of a motorised land vehicle—

(i) on its first registration for road use by the competent authority in the Member State of its manufacture or when a liability to register for road use is first incurred in the Member State of its manufacture, whichever is the earlier,

(ii) if it is not liable to be registered for road use in the Member State of its manufacture, on its removal by its first purchaser or owner, or on its first delivery or on its being made available to its first purchaser, whichever is the earliest, or

(iii) if its manufacturer takes it into use for demonstration purposes, on its first being taken into such use.

147(2) Where the times specified in paragraph (1) above cannot be established to the Commissioners’ satisfaction, a means of transport is to be treated as having first entered into service on the issue of an invoice relating to the first supply of the means of transport.

The meaning of first entry into service was examined in the tribunal case of Peter James Illtyd Lane (VTD13583). On 6 May 1994 Mr Lane paid a deposit for his car (in Germany) and was given an ‘Allocation Certificate’. However local law provided he had to complete some paperwork before he could drive the car away from the dealer; this was completed on 6 June 2004. The tribunal decided that the date of first entry into service was 6 June 2004.

Example of when a vehicle is not a new means of transport

| ### A vessel or aircraft is not new | * when more than three months have elapsed since the date of its first entry into service (see Legal definition of ‘first entry into service’ above); and * it has, since its first entry into service, travelled under its own power for more than

* 100 hours if it is a boat; or
* 40 hours if it is an aircraft | || | ### A motorised land vehicle is not new | * when more than 6 months have elapsed since the date of its first entry into service (see Legal definition of ‘first entry into service’ above); and   * it has, since its first entry into service, travelled under its own power for more than 6000 kilometres.                                                             |

It is important to remember that the NMT test can be met for some considerable time after the initial supply.

Examples

  • A boat that is 3 years old but that has only travelled under its own power for 99 hours is still a new means of transport.
  • A car that has been driven 12,000 kms but is only 5 months and 3 weeks old is still a new means of transport.
  • A car is traded in to a dealer who re-sells it while it is only 4 months old; this is still a new means of transport despite being second-hand.

NMT are not eligible to be included in the margin scheme for second-hand cars.

Seaplanes, hovercraft and amphibious vehicles etc

One potential area of difficulty may be where the class of new means of transport can be viewed as being a hybrid between types of new means of transport. However, as a rule;

  • a seaplane is an aircraft,
  • a hovercraft is a ship and
  • an amphibious vehicle is a land vehicle.

In cases of difficulty, seek advice.