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HMRC internal manual

VAT Transport

The supply of ships and aircraft: ships

What is a ‘ship‘ for the purposes of Group 8?

For the purpose of Group 8, ship includes

  • submarines
  • hovercraft
  • light vessels
  • fire floats
  • dredgers
  • barges
  • lighters
  • mobile floating docks or cranes
  • off-shore oil or gas installations, used in the underwater exploitation or exploration of oil and gas resources which are designed to be moved from place to place.

For the purposes of Group 8, ship excludes

  • fixed oil and gas installations (even though they might be transported to a site as a floating structure);
  • vessels which are permanently moored (e.g. as attractions) and not readily capable of navigation.


Tribunal QED Marine (LON/01/5) VTD 17336 considered the question of what a qualifying ship was; this case concerned a supply in 2000 of the ship’s hull and whether and when it became a qualifying ship. The Tribunal decided that Group 8, Item 8, referred to the supply of a complete ship and not a part-ship.

Para 21:

Therefore…… the legislation is referring to a complete ship, i.e. one that is fully equipped and capable of self propulsion.

Which raised the question, when was a ship complete?

Para 24:

So when does a ship become a qualifying ship? In my view, subject to compliance with note A1(a) a ship qualifies from the time it is seaworthy or, if it is not designed to go to sea, when it is first fit to navigate the waterways for which it is designed.

Information sheet 15/07 section 2 sets out HMRC’s view of what happens if the ‘seaworthiness‘ state changes as follows.

HMRC consider that a qualifying ship or aircraft that loses its seaworthy or airworthy status temporarily can continue to be classed as a qualifying ship or aircraft, provided there is clear and evidenced intention to return the ship or aircraft to a seaworthy or airworthy condition. A qualifying ship or aircraft that loses its seaworthy or airworthy status permanently cannot be classed as a qualifying ship or aircraft. Suppliers who have any doubt about whether a qualifying ship or aircraft has lost its qualifying status should contact the National Advice Service or their Client Relationship Manager.

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Measurement of gross tonnage

Any ship which has a gross tonnage of less than 15 tons is not a qualifying ship for the purposes of zero-rating under Group 8. The gross tonnage of a ship is as ascertained under the Merchant Shipping Acts and is a measurement proportionate to the volume of a ship hull; it is not the same as weight or displacement. For ships whose gross tonnage has not been ascertained under the Merchant Shipping Acts, the method described below should be used; this is HMRC’s simplification of the Shipping Act provisions and has no legal standing.

Hovercraft are not subject to the gross tonnage criteria and are therefore regarded as qualifying ships unless they are designed or adapted for use for recreation or pleasure.

The question of how to measure depth of a boat for the purpose of determining the Gross Tonnage was looked at in the Tribunal case of Fee t/a Swiftcraft (VTD20489). This Tribunal decided that the sidedeck, which runs beside the cabin of a narrowboat, is not a deck so the cabin roof was the reference point for the depth measurement. The Yacht Designers and Surveyor’s Association has informed us that they do view this sidedeck of a narrow boat as the ‘weather deck‘ and thus the measuring point as defined in the legislation. We therefore consider that the Tribunal decision is very much peculiar to the case. You should consult Supply policy team if the Fee decision is cited to support a tonnage measurement.

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Where the gross tonnage of a ship has not been ascertained under the Merchant Shipping Acts it is to be determined for the purposes of VAT only by the following formula (m= meters):

L(m) x B(m) x D(m) x 0.16 for ships under 24m in length


L(m) x B(m) x D(m) x 0.235 for ships of 24m or more in length


L = Length measured from fore part of head of stem to after part of head of stern post, or after part of transom or tuck, in case of a transom or tuck stern without post on same at upper part. This measurement must not include bowsprits, stern mounted diving platforms and other appendages that do not contribute to the volume of the vessel.
B = Beam - breadth of vessel at widest part to the outside of outer planking, whether the vessel is clinker or carvel built. This measurement must not include the thickness of any moulding or rubbing strake, which may be fitted in way of such measurement.
D = Depth measured vertically from the midpoint overall.

The upper calculation point will be for:

  • a decked vessel - the underside of the deck on the middle line, or (if there is no deck on the middle line) the underside of the deck at the side of the vessel plus the full deck camber.
  • an open vessel - the top of the upper strake or gunwale.

The lower calculation point will be for a:

  • wooden vessel - the upper side of the plank at the side of the keel.
  • metal vessel - the top of the plating at the side of the keelson.
  • moulded vessel (for example one made of glass-reinforced plastic) - the inside of the hull. Where no keel member is fitted and the keel is of open trough construction, the calculation point shall be the top of the keel filling, if fitted, or the level at which the inside breadth of the trough is 10 centimetres - whichever gives the greater depth.



This formula, which has been agreed in principle with the Ship and Boat builders National Federation, is based on, and is similar to, the formula used under Part IV of the Merchant Shipping Act 1894. It is hoped that its use in appropriate cases will, by achieving a uniformity of practice, help the trade to decide the liability to VAT of the supply, repair or maintenance of unregistered craft when it depends on the gross tonnage only.



A shipowner may wish to obtain a certificate, for VAT purposes only, showing the gross tonnage ascertained by the formula as above, for production when services that depend on the liability of the vessel itself are subsequently purchased. A certificate of this type will not serve for any purpose other than VAT. Copies of a form of certificate can be obtained from the Ship and Boat builders National Federation. As soon as the tonnage of a vessel is ascertained under the Merchant Shipping Acts that tonnage becomes the basis for determination of VAT liability and the tonnage arrived at by the formula as above will no longer apply.