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HMRC internal manual

VAT Transport

Transport: Ships’ managers, aircraft managers and port agents

Ships’ and aircraft managers normally provide a number of services as part of a management agreement with a ship or aircraft owner or operator. Some will be provided separately and some will be provided together as a single supply under a ship management agreement.

Services of ships’ managers

In the case of ships’ managers, such services will often include:

  • the supervision of the maintenance, survey and repair of a ship;
  • engagement and provision of crews;
  • receiving on behalf of the owner all hire and freight monies;
  • arrangements for loading and discharging;
  • providing for victualling and storing of ships;
  • negotiating bunker fuel and lubricating oil contracts;
  • payment on behalf of the owner of all expenses incurred in provision of services or in relation to the efficient management of ships;
  • the entry of a ship in a protection or indemnity association;
  • dealing with insurance average, salvage and other claims;
  • arranging of insurance in connection with a ship.

Where provided by a ships’ manager under a ship management agreement, such services are treated as a single supply of services, the place of supply and VAT liability of which will be determined by the essential nature of the overall supply. Where the place of supply of the service is the UK, the management fee will normally be zero-rated under either Group 8, item 6(a) (the handling of ships or aircraft in a port, customs and excise airport, or outside the UK), or 10(b) (the making of arrangements for supplies of services in items 1-9 and 11), providing the normal conditions for those items are met (see VTRANS140000 and VTRANS190000).

In the George Hammond PLC (VTD 20353) tribunal case it was decided that where the manager incurs taxi and hotel costs on behalf of ships’ crews these could be seen as subsumed within the charge of ship handling services when being recharged to the ship owner

Whilst we do not accept that everything that Hammonds does on behalf of its clients can be subsumed within item 6 of Group 8 of Schedule 8, nonetheless Hammonds incurred the hotel and taxi expenses in the course of its supply of a crew to the ship owners, and such supply is in our view encompassed by “handling”.

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Ancillary services provided by ships’ managers

The following are examples of ancillary services provided by ships’ managers for which a specific fee is charged:

  • Seeking and negotiating employment for ships. This is zero-rated under item 10(b) of Group 8 provided the service being arranged is itself zero-rated under items 1 to 9 or 11 of Group 8. For example, item 10(b) zero-rates the supply of arranging a supply of international freight transport which is zero-rated under item 5 of Group 8 to the extent that the transport takes place in the UK (see VTRANS190000).
  • Provision of crews. The supply of a crew for a zero-rated ship is zero-rated under item 6(a) of Group 8. This includes the supply of the maintenance of a sufficient reserve of crew. A charge is often raised for such a supply when a proportion of pooled management costs is attributed to a ship.
  • Advising the owner and consulting the shipbuilder about design and specification of a new ship. A supply of these services is normally standard-rated, but may amount to a Schedule 4A, Item 16 service (supplied where the recipient belongs), when supplied to certain overseas customer. See VATPOSS.
  • Advertising, sales promotion and public relations work in respect of ships. A supply of these services is normally standard-rated, but may amount to a Schedule 4A, Item 16 service (supplied where the recipient belongs), when supplied to certain overseas customer. See VATPOSS.

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Aircraft manager’s services

The treatment of aircraft managers’ services should follow that of ships’ managers’ services outlined above.

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Port agents

A port agent supplies services which are related to the field of activities in and around a port, and will normally charge a composite fee to cover all the arrangements he makes. Such a fee may be zero-rated under either items 6 or 10 of Group 8 where the service is directly related to:

Separate supplies must be looked at individually to determine their treatment. Before deciding liability, you will first need to consider the place of supply: see VATPOSS and Notice 741, Place of supply of services.