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HMRC internal manual

VAT Transport

Handling of ships and aircraft: Interpretation and application of item 6(a)


Item 6(a) of Group 8 is interpreted in the light of the wording of the Directive, and therefore relates to services which serve the direct needs of the ship or aircraft or its cargo.

The meaning of serving the direct needs of a ship was one of the questions addressed by the ECJ in the case of Gunther Berkholz (ECJ 168/84). Berkholz argued that the services of operating gaming machines on ferries plying between Germany and Denmark should be exempted under Article 15(8) of the then Sixth Directive (now Article 148(d)). The Court found that

the only services exempted under Article 15(8) are those which are directly connected with the needs of sea-going vessels or their cargoes, that is to say services necessary for the operation of such vessels. The installation of gaming machines whose object is to entertain the passengers and which themselves have no intrinsic connection with the navigational requirements cannot be classed as such.

Handling services

Item 6(a) of Group 8 zero-rates handling services provided for qualifying ships and aircraft when the services are performed:

  • in a port or customs and excise airport (see paragraph VTRANS070400); or
  • outside the UK.

Handling services provided in the UK for non-qualifying ships and aircraft are standard-rated, unless supplied to an overseas business (see VTRANS170000).

The following are examples of charges raised or handling services provided in respect of supplies which may be zero-rated under item 6(a):

| Ships | * port and harbour dues * dock and berth charges * conservancy charges (including provision of local lights, buoys and beacons) * graving dock charges * mooring charges * demurrage (where there is a charge for failing to load or discharge a ship within specified time) * security and fire services * supply of crew members * the day to day management of a ship (see VTRANS180000). | || | Aircraft | * landing, parking or housing fees * compass swinging fees * apron services * airport navigation service charges * security and fire services * supply of crew members * supply of landing slots |

There may be circumstances when some of the charges listed above do not represent the consideration for a supply and are outside the scope of VAT. This can occur when such charges are raised under statutory authority by a Government department, or by another agency appointed to carry out a statutory requirement.

Hire of goods

The letting on hire of goods alone is not zero-rated under this item, by virtue of legal Note (5) to Group 8. That exclusion was necessary because a supplier letting goods on hire is unable to determine whether or not that hire is related to the direct needs of ships, aircraft or their cargoes.

Exclusion of non-qualifying ships and aircraft

Group 8, Legal Note 7 restricts the relief under item 6(a) to qualifying ships and aircraft except where the provisions of Item 11(b) are in place (VTRANS170200).