Value Added Tax

Liability ― aircraft and ships

Produced by Tolley
  • 09 May 2022 15:28

The following Value Added Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Liability ― aircraft and ships
  • Aircraft, ships and liability ― the basics
  • Qualifying aircraft and ships
  • Qualifying aircraft
  • Qualifying ship
  • Evidence that a ship or aircraft is qualifying
  • Supplies of aircraft and ships
  • Parts and equipment used in ships and aircraft
  • Maintenance, modification and conversion of aircraft and ships
  • Handling services in connection with ships and aircraft
  • More...

Liability ― aircraft and ships

This guidance note looks at the liability of supplies of, and connected with, aircraft and ships.

For an overview of the concept of VAT liability generally, see the Liability ― overview guidance note.

For in-depth commentary on the legislation and case law on supplies of and connected with aircraft and ships, see De Voil Indirect Tax Service V4.251-V4.251C.

Aircraft, ships and liability ― the basics

The supply of certain ‘qualifying’ aircraft and ships is zero-rated. This zero-rate extends to the lease and hire of qualifying ships and aircraft. However, when a ship of aircraft is hired (or ‘chartered’) there are often difficulties in determining if what is being supplied is really a ship or aircraft or some sort of passenger transport, freight or other service (and therefore subject to different VAT liability rules and considerations).

There are detailed provisions in the VAT legislation for determining whether an aircraft or ship is ‘qualifying’ and these provisions need to be reviewed carefully before VAT relief is applied by a supplier. It will normally be necessary (or at least prudent) for a supplier to obtain evidence from its customer to demonstrate that a ship or aircraft is qualifying and that VAT relief can therefore be applied.

In limited circumstances the zero-rate of VAT may also be available for supplies of non-qualifying ships and aircraft, notably in relation to lifeboats, certain houseboats and certain vessels adapted for disabled persons.

As well as applying to the supply of some ships and aircraft, the zero-rate

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