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HMRC internal manual

VAT Transport

HM Revenue & Customs
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Zero-rating of passenger transport: Meaning of "passenger transport"

A supplier makes a supply of passenger transport if he provides a vehicle, ship or aircraft with a driver or crew, for the carriage of passengers. If he does not supply the driver or crew, then he is making a supply of the vehicle, ship or aircraft itself, and this is not a supply of passenger transport: VTRANS110000 covers these supplies. However, the charter of ships and aircraft, are also zero-rated, Group 8 under items 1 and 2 and notes A1, 1 and 2 and the supply on charter may include the crew. VTRANS110300 gives more information on chartering.

The zero-rating under item 4 of Group 8 applies whether the supplier is a subcontractor or main contractor, and irrespective of whether he receives payment of a fare from an individual passenger or a bulk payment in respect of a group of passengers.

If a transport operator buys in and resupplies passenger transport the operator must account for VAT under the Tour Operators’ Margin Scheme (see VTRANS021200).


There have been several court and Tribunal cases considering the question of whether the carriage of persons in various types of vehicle amounts to transport of passengers for the purposes of item 4.

In Blackpool Pleasure Beach Co (1974 STC 138), the High Court looked at a Big Dipper fairground ride, which the appellant had successfully argued before the Tribunal amounted to transport of passengers under item 4(a) of the then law, Group 10 of Schedule 4 to the Finance Act 1972. Lord Widgery agreed with the Department that in considering the ordinary meanings of the words, a fairground ride was not transport of passengers, and the Department’s appeal was allowed: the supply was standard-rated. His reasoning has often been referred to in later decisions on the scope of item 4(a):

In my view the essence of the transport of passengers is the carriage of a passenger from A to B, and perhaps from B to C. I am fully conscious of the fact that there are such things as return tickets and round trips, and that a person setting out to go from A to B may nevertheless retrace his steps or continue his journey in such a way as to end up in the end at A again. But the essence… of transport of passengers is that the passenger is taken from A to B because he wants to be at B or because there is some purpose in being at B, and if he then goes on from B to C his carriage may still be transport of a passenger because he wants to be at C and so on. I cannot accept that a person who in effect remains on one spot all the time is on any view to be considered under the head of being transported as a passenger…I think the words of the schedule in their ordinary meaning…must necessarily exclude movement which in effect is confined to a single point and does not involve the deliberate movement or transfer of a passenger from one point to another.

Examples of services not regarded as zero-rated passenger transport

The following are examples of services which are not regarded as the transport of passengers for the purposes of zero-rating under Item 4:

  • donkey rides and similar rides
  • novelty rides on miniature and model railways, ghost trains, roundabouts, dippers,
  • other fairground equipment and similar attractions (see the Blackpool Pleasure Beach case mentioned above).
  • the hire of a vehicle without a driver
  • the services 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.

This is a list of examples only and is not exhaustive.