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HMRC internal manual

VAT Transport

Zero-rating of passenger transport: Passenger transport in vehicles designed or adapted to carry ten or more passengers - item 4(a)


Item 4(a) zero-rates passenger transport within the UK in any vehicle, ship or aircraft designed or adapted to carry ten or more passengers. (The driver and crew are treated as passengers for the purposes of determining the carrying capacity.)

The test is one of design, in Cirdan Sailing Trust [2006] STC 185, here a boat could only legally carry fewer than 10 passengers but the High Court found that:

… the test in item 4 is a test largely related to the physical capacity of the vessel, and that, if a particular vessel meets the physical requirements implied by the test, the statutory wording does not permit the denial of zero-rating on the ground that it would be unlawful for that particular vessel to carry passengers up to the level of the physical capacity.

If the carrying capacity of the vehicle, ship or aircraft is less than ten passengers at the time of the supply, that transport is standard-rated unless it can be zero-rated under Group 8, Item 4(b), 4(c), or 4(d) or Legal Note 4D for the transport of disabled passengers in specially adapted vehicles, or is an ambulance service - see VTRANS020900.

Examples of zero-rated passenger transport

  • cliff lifts, where the individual cars are designed or adapted to carry at least ten passengers
  • excursions by coach and train (including steam railways)
  • horse drawn buses
  • mystery coach trips and boat trips
  • sightseeing tours
  • the transport element of park and ride schemes designed to reduce traffic congestion in city centres.
  • trams and road trains

Detailed examples are given in VTRANS020900, VTRANS021000, VTRANS021100 and VTRANS021200.


The majority of the Tribunals took place when the law specified a 12-seat parameter, this was changed to 10 seats in April 2001.

The Tribunal considered the significance of what constituted the vehicle which was designed or adapted to carry 12 or more passengers in several cases.

In Needles Chairlift Co Ltd (LON S/73/168), a cliff chairlift consisting of 54 sets of two-seater chairs was found not to be a vehicle in its own right.

In Heights of Abraham (MAN 85/51), another cliff lift consisted of twelve individual gondolas, not joined together, each carrying six persons. The lift itself was again found not to be a vehicle in its own right, and the appellants contention that the individual gondolas should be grouped in some way was not accepted. Each gondola held fewer than twelve passengers, so zero-rating was not appropriate.

In Llandudno Cabinlift Co Ltd (1973 VATTR 1), the entire lift system was found to be a system for moving the individual cars, rather than a vehicle in its own right: the individual cars were vehicles, but only carried four passengers each, and the lift did not therefore qualify for zero-rating under item 4(a).

In Country Hotel Narrow Boats (MAN/2954/94), the Tribunal rejected the appellant’s argument that a powered barge towing an unpowered “butty” boat was similar to a train and should be treated as a single vehicle. The Tribunal held that each boat was a vehicle or ship for the purpose of item 4(a).

In Granada Group PLC (MAN/95/2573) the Tribunal considered whether the charge for admission to the American Adventure Theme Park was a single standard rated supply, or separate supplies of the right to use each facility of which those relating to a miniature railway, boats and a land train, all of which were designed to carry 12 or more passengers, could be zero rated under item 4(a) of Group 8. It involved supplies made prior to 1 April 1995, when the VAT (Transport) Order 1994 was implemented (see VTRANS030000). The Theme Park contained a number of rides and attractions including the miniature railway system which carried patrons half way round a 37 acre lake, boats which carried them across the lake, and the land train which carried them from the car park to the entrance and vice versa.

The Tribunal held that there was a single supply of standard rated admission. However, it found that the ride on the land train was not a supply since there was no consideration, the service being provided before admission was charged. It did not state whether, had there been separate supplies, it would have regarded the miniature railway and boats as standard rated rides or zero rated passenger transport.

Taxis and Limousines

The provision of transport in taxis and hire cars, which usually carry less than ten passengers, is standard-rated. However, the supply of a limousine (with a driver) which can seat 10 or more passengers is zero-rated under item 4(a) regardless of whether it is licensed or legal to carry that number of passengers- see reference to Cirdan above.

Notice 700/25 Taxis and hire cars gives guidance on the way VAT affects the taxi and hire-car trade.

Minature and narrow-gauge railways

Passenger transport on miniature railways within a place of recreation or interest are excluded from zero rating (see VTRANS030000). However, where they are not in such a place, or are in a place to which the public have free and unrestricted access, such as a public park, zero rating is likely to depend on factors such as:

  • the overall scale of the railway (distance between stations, total length of track etc);
  • the context (whether or not one of several similar rides); and
  • whether it performs a genuine passenger transport function (transports passengers around an area, up steep inclines etc or whether it is effectively confined to the spot).


In Metroland Ltd (MAN 95/2709) the Tribunal held that a miniature train ride, which was one of several attractions within an indoor theme park, did not amount to passenger transport. The ride lasted some two minutes and the Tribunal stated that any alighting at the “stations” was merely an incident of what was essentially a pleasure ride. This case concerned supplies made prior to the introduction of standard rating for passenger transport within a place of entertainment (see VTRANS030000). Metroland’s subsequent appeal to the High Court was dismissed because, in the event, they did not attend to present their case.

In Narogauge Ltd (LON 95/1867), the Tribunal held that a miniature railway ride within a public park was transport of passengers. The journey was a circuit from the main station to another 375 yards along the track and on back to the main station, a total journey of a mile. The Tribunal likened the distance between stations to the distance of a one stop bus ride. It stated that although the ride was a novel and attractive means of transport, it was not similar to a fairground attraction where patrons necessarily remained in one place.

Ships and boats

In Cirdan Sailing Trust (VTD 18865) the Tribunal looked at the meaning of designed or adapted in item 4a and concluded (Para 66) that it is the carrying capacity at the time of supply that is critical not that which may have been the case when originally built.

The subsequent appeal [2006] STC185 found that when measuring the capacity of the vessel

Nevertheless, the condition in item 4(a), which involved identifying the number of passengers a ship was designed or adapted to carry, had to be applied in a sensible way by reference to the actual and anticipated way in which the ship was to be used.

In other words when considering whether to allow zero-rating under item 4(a) you must look at the capacity at the time of supply and measure it in a the light of the current layout and intended use.

This rationale applies equally to other forms of transport. 


Strictly, item 4(a) standard rates passenger transport services in aircraft with a carrying capacity of 10 or more passengers which have been adapted to carry less than that number. However, some aircraft are designed with flexible seating capacities. For example, an aircraft with a maximum design capacity of ten passengers may be so arranged to carry eight passengers; or an aircraft which normally flies in a eight-seat layout may be rearranged to its full ten seat capacity. Similarly, some aircraft are sufficiently adaptable to change their seating capacity from flight to flight. This can cause problems in deciding what constitutes the capacity of the aircraft for design or adaptation purposes. We have agreed with the General Aviation and Manufacturers Association (GAMTA) that with effect from 1 May 1997 passenger transport services may be zero-rated in such circumstances provided:

  • the aircraft is designed, according to the flight manual, to carry ten or more passengers, including crew; and
  • the necessary seat runners, tracks, mountings etc for at least ten seats are permanently in place in the aircraft; and
  • at least ten seats, together with their safety equipment (seat belts, life jackets, oxygen masks etc) are maintained at all times by the operator to airworthiness standards administered by internationally recognised aviation authorities or in accordance with Ministry of Defence specifications.

If these conditions cannot be met, the aircraft is regarded as being adapted to carry less than ten passengers and passenger transport services therein are standard-rated, unless they qualify for domestic zero-rating under items 4(b) or (c).