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HMRC internal manual

VAT Place of Supply (Transport)

Passenger transport: services supplied in the course of passenger transport


A wide variety of services can be supplied for consumption by passengers travelling on transport which moves between the UK and other countries. There are also services supplied by transport operators to businesses which trade on board independently. The guidance below applies when you are considering services which are separate supplies in their own right. That is to say they are not part of a single supply of transport. See the manual covering the liability of transport for the distinction between single supplies of transport and separate supplies of transport and additional services.


Services consumed on board

Normal position

There are no special place of supply rules for the treatment of such services, and when considering place of supply the normal rules should be applied. There are two exceptions, for catering and gaming machines.


A decision of the ECJ in the case of *Faaborg-Gelting Linen A/S (ECJ C-231/94) *found that catering was a supply of services, supplied where the supplier is established under Art 9(1) of DIR 77/388 [Now Art 43 of the PVD 2006/112]. Many member states, including the UK, have not however implemented this judgement, since many questions relevant to the issue were not fully addressed in the decision. In the UK, catering is treated as a supply of goods, and is outside the scope of UK VAT when supplied for consumption on board intra-EC transport under article 6 of the VAT (Place of Supply of Goods) Order 2004. It is also treated as outside the scope of UK VAT when supplied on other international passenger transport (see the manual covering the place of supply of goods).

Gaming machines

Another decision of the ECJ which has not been implemented in the UK and some other Member States is the finding in a German case, Gunter Berkholz (ECJ C-168/84), that the provision of the service of playing on gaming machines is supplied where the supplier is established. The UK has applied a ‘stand still’ provision allowed under Art 110 of the Princiipal VAT Directive (PVD) 2006/112 to continue to treat such supplies on board ships travelling outside UK territorial waters as outside the scope of UK VAT, pending proposals from the Commission for the common VAT treatment of goods and services supplied for consumption on board.

The current position is that where a trader operates amusement or gaming machines on a passenger ship which is leaving the UK for a foreign destination (a foreign-going vessel) the supply of services is regarded as being made outside the UK, and therefore outside the scope of UK VAT. Any use of the facilities in UK territorial waters is effectively ignored provided the vessel has cleared to go foreign.

Where the machines are operated on vessels which are not foreign-going, for example coastwise journeys within the UK, the supply is made within the UK and is liable to VAT at the standard-rate.

On-board trading concessions

Ferry operators commonly supply the right to operate a concession to trade on board, such as that to a newspaper stall, photographer, and so on. Before 1 January 2010 provided that the contract is in the form of a licence, the supply is treated as falling within paragraph 1 of Schedule 5. The place of supply will be determined by the normal rules for Schedule 5 services. Where the contract is not in the form of a licence, such rights are treated as basic rule supplies and the place of supply is where the supplier belongs (section 7(10) VATA 94).

Some confusion arose over this long-standing policy (set out in Press Notice No 890, dated 9 March 1984- see below), concerning licensing arrangements. You should therefore take particular care to establish the nature of the supplies.

From 1 January 2010 the place of supply will fall under the ‘general rule’ see guidance in VATPOSS.


Press Notice 890 9 March 1984


HM Customs and Excise have now agreed that ship operators who are registered traders and who grant licences to supply goods or services on board their passenger ships, can zero-rate the supply of such rights when concessionaires belong overseas.

Last year, it was announced that the supply of rights of this kind should be VAT standard rated, but following representations by the General Council of British Shipping, the implementation of the liability change was deferred until the position of overseas concessionaires could be resolved.

Note to Editors

The granting of shipboard concessions in now considered to be the supply of a right falling within the terms of Paragraph 1 of Schedule 3 of the VAT Act 1983, provided that the contract is in the form of a licence. The zero-rating is provided under items 5 or 6(a) of the Zero Rate Group 9 when the right is supplied to business customers belonging overseas. Press Notice No 836 (19 May 1983) and No 851 (12 August 1983) describe the extent of the liability changes in more detail.