Passenger transport ― zero and reduced-rating

Produced by Tolley

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

  • Passenger transport ― zero and reduced-rating
  • What is passenger transport?
  • Using crew who are not employees
  • When can passenger transport services be zero-rated?
  • When is a means of transport designed or adapted to carry at least 10 passengers?
  • What are scheduled flights?
  • Can zero-rating apply for arranging passenger transport as agent?
  • When can passenger transport services be reduced-rated (cable-suspended transport)?
  • What kinds of transport are excepted from the zero and reduced rates?
  • When do services form part of a single supply of passenger transport?
  • More...

Passenger transport ― zero and reduced-rating

This guidance note looks at the scope of VAT relief for supplies of passenger transport made in the UK.

For the place of supply of passenger transport, see the Place of supply of services ― passenger transport guidance note.

For overviews of zero and reduced-rating respectively, see the Zero-rating ― overview and Overview ― items liable to VAT at the reduced rate guidance notes.

For in-depth commentary on the legislation and case law in this area, see De Voil Indirect Tax Service V4.251B and V4.422 for zero-rating and reduced-rating, respectively.

What is passenger transport?

HMRC suggests that passenger transport services are supplied when a vehicle, ship or aircraft is provided together with a driver or crew, for the carriage of passengers. The supply of passenger transport can include ‘incidental services’ (see below in this guidance note).

The hire of a vehicle, ship or aircraft without crew is not seen by HMRC as a passenger transport service and is usually treated as the hire of a means of transport.

In one High Court case which was looking at whether the ‘Big Dipper’ fairground rise could be said to be passenger transport, the Court suggested that ‘the essence of the transport of passengers is the carriage of a passenger from A to B, and perhaps from B to C’.

The table below summarises examples given by HMRC of what is and is not passenger transport (although see later in this guidance note for whether these supplies qualify for either zero or reduced-rating):

Passenger transportNot passenger transport
Pleasure cruisesDonkey rides and similar rides
Cliff liftsNovelty rides on miniature and model railways, ghost trains, roundabouts, dippers, and other fairground equipment and similar attractions
Excursions by coach or train (including steam railways)The hire of a vehicle without a driver
Horse drawn busesThe service of a driver alone
Mystery coach or boat tripsThe supply of any vehicle with or without crew for a non-passenger service, for example to

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