NOTICES

Is A Charter Flight Liable For UK VAT?

(according to UK VAT rules, and mainly concerning flights to/from UK)

Updated February 2012.

PASSENGER CARGO

DESIGNED FOR MORE THAN 10 SEATS?

10 OR MORE LESS THAN 10 ZERO RATED (Ref.5)

ZERO RATED (Ref.1) |

| (Ref.2)

DOMESTIC UK OR INTERNATIONAL FLIGHT ?

DOMESTIC UK INTERNATIONAL

VAT PAYABLE (Ref.4) ZERO RATED (Ref.3)

(Ref.1) HMRC Notice 744A “Passenger Transport” (December 2009), Paras 2.1. & 4.1

(Ref.2) HMRC Notice 744A “Passenger Transport” (December 2009), Paras 3.2 & 4.5

(Ref.3) HMRC Notice 744A “Passenger Transport” (December 2009), Para 3.2

(Ref.4) HMRC Notice 744A “Passenger Transport” (December 2009), Paras 3.1 & 4.5

and HMRC Notice 744C “Ships, Aircraft & Associated Services” (July 2011), Para .4.9.2

(Ref.5) HMRC Notice 744C “Ships, Aircraft & Associated Services” (July 2011),

Paras 3.3, 4.4, 4.9.2

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Relevant extracts from application HMRC documents

Passenger Transport - HMRC Notice 744A

(December 2009)

2.1 What is the liability of passenger

transport services?

Passenger transport services supplied in the UK (including its

territorial waters) can be either: zero-rated (but you must keep

evidence to substantiate zerorating), or standard-rated.

You can zero-rate the transport of passengers …

from a place within to a place outside the UK or vice versa to the extent those

services are supplied in the UK (see section 3)

in any vehicle, ship or aircraft designed or adapted to carry not less than 10

passengers to the extent those services are supplied in the UK (see section 4)

on any scheduled flight (see section 5)

3.1 How is the place of supply of passenger

transport determined?

The place of supply of passenger transport services is determined according to

where the transport physically takes place. If it takes place:

inside the UK the supplies are all within the scope of UK VAT

both inside and outside the UK, the element that takes place within the UK is

within the scope of UK VAT (see paragraph 3.2),

outside the UK the supplies are outside the scope of UK VAT (see item 3.3).

3.2 What is the VAT liability of passenger

transport that takes place both inside

and outside the UK?

Passenger transport that takes place both inside and outside the UK is

zero-rated to the extent the transport takes place within the UK,

irrespective of the carrying capacity of the vehicle, ship or aircraft. It applies

to:

single and return journeys, as long as the transport is scheduled to

stop, put-in or land in another country, and

ourneys to or from oil rigs situated outside UK territorial waters.

But does not apply to:journeys, which begin, and end in UK, but take

place partly outside the UK (without a scheduled stop).

4.1 In what circumstances can I zero-rate

domestic passenger transport?

You can zero-rate domestic passenger transport in any vehicle, ship or

aircraft that has at least 10 seats, including those for the driver and crew,

unless the supplies are exceptions from the zero rates (see section 8).

4.5 What if I supply vehicles, ships or

aircraft with a carrying capacity of less

than 10 passengers?

If the carrying capacity of the vehicle, ship or aircraft is less than 10

passengers, then the passenger transport is standard-rated unless it

can be zero-rated under the conditions:set out in section 3, -

< i.e. International flights>

Ships, Aircraft & Associated Services -

HMRC Notice744C

(July 2011)

3.3 What is a 'qualifying aircraft'?

A 'qualifying aircraft' is legally defined as any aircraft which:

is used by an airline operating for reward chiefly on international routes, or

is used by a State institution and is of a weight of not less than 8,000 kg and

is neither designed nor adapted for use for recreation or pleasure

4.4 What is the VAT liability of a supply of

a ship or aircraft?

The supply of a qualifying ship or aircraft may be zero-rated. Other ships or

aircraft are standard-rated.

4.9.2 Hire of a ship or aircraft with captain,

pilot or crew

This is often referred to as a wet charter, charter party or time charter where

normally the customer exercises direction over the operation and movement

of the ship but the owner provides the crew. The VAT treatment requires there

to be a formal charter/hire contract in place and is treated as the supply of a

means of transport. This is zero-rated if the ship or aircraft is a qualifying one.

If the ship or aircraft is not a qualifying one the supply cannot be zero-rated.

Nor can the supply of services under a charter consisting wholly of any one

or more of the following:

transport of passengers

accommodation

entertainment, or

education

wholly performed in the United Kingdom.