Liability ― aircraft and ships

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

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

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