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HMRC internal manual

VAT Transport

Zero-rating of passenger transport: Cruises: Guidance agreed with the British Marine Industries Federation and similar bodies

(Referred to in VTRANS021340)

These notes cover cruises on inland waterways comprising passenger transport services without other facilities and entertainment cruises comprising passenger transport, catering and/or entertainment. They do not apply to the treatment of holiday cruises. Customs have reviewed these notes and approved the content. Copies are available to local VAT offices within internal VAT guidance.

These notes supplement guidance given in paragraph Notice 744A VAT: Passenger transport and should be read in conjunction with it. The zero rating for passenger transport referred to in these notes is available subject to the normal conditions set out in Notice 744A.

1. Am I making a single zero rated supply of transport?

Where the cruise is held out at a single price and includes light refreshments such as a cup of coffee and biscuits, a cup of tea with a scone or sandwich etc these are regarded as integral to a zero rated supply of passenger transport provided no discounts are given if the customer chooses not to opt for such “extras.”

Trips on boats from point A to point B or round trips, without other facilities are also zero-rated.

2. Am I making a single standard rated supply?

Cruises held out at a single price and which offer more substantial catering e.g a three course meal, will normally be classified as a single standard rated supply.

3. Am I making multiple supplies?

However, where the passenger transport element is clearly identified somewhere in the brochure e.g shown in the booking conditions at hourly, two hourly etc rates, this will be treated as a multiple supply. This applies even if a single inclusive price is shown for individual cruises in the main part of the brochure. Alternatively, if the passenger transport, catering or other elements (e.g entertainment) are accurately itemised on bills to customers, this will be treated as a multiple supply.

Customs have advised that they will critically examine instances where the passenger transport elements appear to have been inflated so as to reduce the VAT due on the other elements.

Where a separate charge is shown for the passenger transport element, as described on this page, cruises with light refreshments would also be treated as multiple supplies, with the passenger transport element being zero rated and the catering element standard rated.

4. Refreshments purchased separately whilst on board

In any of the above cruises, where the passenger has the option to buy refreshments such as beverages, alcoholic drinks, crisps etc whilst on board and pays separately for them, they are standard rated.

5. What if I buy-in and resupply catering and/or entertainment to customers?

Where you buy-in and resupply catering and entertainment to customers, strictly, tax should be accounted for using the Tour Operators’ Margin Scheme. However, Customs have undertaken not to apply that Scheme to members, providing they account for the right amount of tax in accordance with these notes.

6. What if I am not sure how to treat my cruises?

If you are not sure how your cruises should be treated for VAT purposes, you should contact your local VAT office for advice.