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HMRC internal manual

VAT Transport

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HM Revenue & Customs
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Zero-rating of passenger transport: International passenger transport - item 4(d)

International journeys take place partly within and partly outside the UK. Transport which takes place outside the United Kingdom is outside the scope of UK VAT (but see VATPOSTR2000).

Outside the UK means more than 12 nautical miles from the UK coastline at low water and applies equally to UK airspace above water; or across the Irish land boundary. The UK is England, Scotland, Wales and Northern Ireland; it does not include the Isle of Man or the Channel Islands.

To the extent that international passenger transport takes place within the UK, it is zero-rated under Group 8, item 4(d), irrespective of the carrying capacity of the vehicle, ship or aircraft.

The zero rate applies to single journeys, round trips, journeys to or from an oil rig situated outside UK territorial waters, journeys through the Channel Tunnel and across the Irish land boundary. It applies whether the supplier receives payment of a fare from an individual passenger or a bulk payment for a group, and regardless of who the customer is.

Example:

An eight-seater minibus provides transport for passengers from Northern Ireland to the Irish Republic. The part of the journey which takes place in the Republic is outside the scope of UK VAT. The part which takes place in Northern Ireland is zero-rated under Group 8, item 4(d). The fact that the minibus carries less than ten passengers does not affect the position, because there is no requirement for a minimum carrying capacity under item 4(d).

Journeys which begin and end in the UK are not zero-rated under item 4(d) unless the means of transport puts in lands or stops in another country in accordance with a pre-planned schedule or itinerary. By virtue of VAT Act 1994, Schedule 4A, Item 2, a journey between two points in one country which does not put in land or stop in another country is treated as supplied entirely in the country where the journey begins.

Some international passenger transport services in connection with recreational activities and airport car parks may be excluded from zero-rating under this item. If, for example, a recreational balloon flight took passengers from the UK to France, that part of the flight which is within the UK would be standard-rated, (see VTRANS030000).

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