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HMRC internal manual

VAT Transport

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HM Revenue & Customs
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Parts and equipment for ships and aircraft: Law

UK law

The law applying the zero-rate to supplies of parts and equipment for ships and aircraft is in the VAT Act 1994, Schedule 8, Group 8, items 2A and 2B, and Note 2A. These were introduced as new items in Group 8 with effect from 1 January 1996 by the Value Added Tax (Ships and Aircraft) Order 1995, SI 1995/3039.

2A. The supply of parts and equipment, of a kind ordinarily installed or incorporated in, and to be installed or incorporated in,-

  1. the propulsion, navigation or communication systems; or
  2. the general structure of a qualifying ship or, as the case may be, aircraft.

2B. The supply of life jackets, life rafts, smoke hoods and similar safety equipment for use in a qualifying ship or, as the case may be, aircraft.

Note:

(2A) Items 2A and 2B do not include the supply of parts and equipment to a Government department unless -

  1. they are installed or incorporated in the course of a supply which is treated as being made in the course or furtherance of a business carried on by the department; or
  2. the parts and equipment are to be installed or incorporated in ships or aircraft used for the purpose of providing rescue or assistance at sea.

EU law

Group 8 Items 2A and 2B are based on Principal VAT Directive (Directive 2006/112) Article 148.

148 Member States shall exempt the following transactions:

  1. the supply of goods for the fuelling and provisioning of vessels used for navigation on the high seas and carrying passengers for reward or used for the purpose of commercial, industrial or fishing activities, or for rescue or assistance at sea, or for inshore fishing, with the exception, in the case of vessels used for inshore fishing, of ships’ provisions;
the supply of goods for the fuelling and provisioning of fighting ships, falling within the combined nomenclature (CN) code 8906 10 00, leaving their territory and bound for ports or anchorages outside the Member State concerned;    2. the supply, modification, repair, maintenance, chartering and hiring of the vessels referred to in point (a), and the supply, hiring, repair and maintenance of equipment, including fishing equipment, incorporated or used therein;   3. the supply of services other than those referred to in point (c), to meet the direct needs of the vessels referred to in point (a) or of their cargoes;   4. the supply of goods for the fuelling and provisioning of aircraft used by airlines operating for reward chiefly on international routes;   5. the supply, modification, repair, maintenance, chartering and hiring of the aircraft referred to in point (e), and the supply, hiring, repair and maintenance of equipment incorporated or used therein;   6. the supply of services, other that those referred to in point (f), to meet the direct needs of the aircraft referred to in point (e) or their cargoes.