VATPOSTR2300 - Passenger transport: services supplied in the course of passenger transport

Introduction

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.

Catering

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]. The UK, did not implement this judgement, because 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 international passenger transport (see the manual covering the place of supply of goods). On domestic transport the supply of catering is a separate supply, and treated accordingly, unless it forms an integral part of the transportation, and is included in the ticket price.

Gaming machines

Another decision of the ECJ which has not been implemented in the UK 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 continues to treat such supplies on board ships travelling outside UK territorial waters as outside the scope of UK VAT.

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 to a foreign destination.

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.

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