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HMRC internal manual

VAT Transport

Zero-rating of passenger transport: Cruises: Business Brief 10/99 on passenger transport services including catering


This Business Brief explains Customs’ position following the Sea Containers case, which considered the VAT position of passenger transport supplied with catering on a railway train. There were a number of different types of supply all of which included in-house catering which was promoted as high quality in advertising material.

The supplies included:

  • charter of the whole train plus crew, with separately negotiated catering;
  • charter of the whole train plus crew, with catering included in a single price;
  • round trips sold to individual passengers which included high quality catering, such as five course meals and champagne lunches; and
  • a stopping trip sold to individual passengers who could alight before the return journey, again including catering.

The issue for the Tribunal was whether there were single supplies of zero-rated passenger transport, or separate supplies of transport and standard-rated catering. The Tribunal found that in each case there were separate supplies.

Customs consider that this decision, in conjunction with the remarks of the European Court of Justice on single and multiple supplies in another case (Card Protection Plan) confirms their current policy. Where an element of catering is included with scheduled passenger transport for no extra charge (such as a meal included in the price of an airline ticket) there is a single supply of passenger transport. Where catering, or other elements such as discos or receptions, are included as a feature of leisure travel, there are separate supplies, and the catering and other extras are taxable at the standard rate.

As mentioned in Business Brief 5/99, Customs consider that the decision in the recent case of Pennine Boat Trips is confined to that case (VTRANS021360). Refund claims based on Pennine will not be repaid, and the decision will not be applied more generally. The treatment of cruises remains as set out in section 9 of Notice 744A, Passenger Transport, and agreements with trade associations representing operators of boat trips on canals and rivers remain in place.