VAT question on transport business

VAT question on transport business

Didn't find your answer?

Hello all

Clients business is that of transportation, which in itself is exempt from VAT. However, sometimes he will offer a package, say transport to a local spa and a day out at the spa. He will also supply champagne in his luxury minibus. My question is a) can he claim back vat on the spa day and the champagne that he is purchasing then selling to the customer as a package and b) will the supply of spa day and champagne be exempt from VAT as it is part of the transportation business or will that element have to be invoiced with the normal rate of vat?

All answers and guidance would be appreciated

Replies (5)

Please login or register to join the discussion.

avatar
By mikeyban
02nd Apr 2014 06:44

Exempt? Surely it's zero rated? If qualifying as zero rated...you can obtain Vat back on input vat .

Thanks (0)
By Steve Kesby
02nd Apr 2014 07:51

You need to read up...
... on TOMS.

Thanks (0)
RLI
By lionofludesch
02nd Apr 2014 08:21

Yes, yes, yes

Transport is indeed zero rated, not exempt.

And the Tour Operator's Margin Scheme is precisely what covers your query.

Basically, it assumes you make the same percentage margin on standard rated costs as on zero rated costs. 

Thanks (0)
chips_at_mattersey
By Les Howard
02nd Apr 2014 08:50

TOMS

You are describing TOMS supplies. As Steve Kesby says, read up on TOMS. The margin on activities in the EU are standard rated.

Thanks (0)
avatar
By Martin Pooley
03rd Apr 2014 19:10

TOMS confusion

Hi

Assuming he does the transport from own resources then the transaction described is not in TOMS because there is no bought in transport or accommodation etc. Neither the day at the spa nor the champagne will bring the transaction within TOMS. See the flowchart on my website  or the list of items in 709/5 which HMRC say fall in TOMS. 

Assuming the transport is in vehicle for 10 or more then it should be zero rated.

Assuming the transaction is one supply, rather than two or more separate supplies, then the question is whether the whole is zero rated or standard rated. Depends on facts. Ask e.g. the relative values. 

As TOMS does not apply I see no reason why input tax should not be reclaimed subject to the usual constraints e.g. getting a VAT invoice. 

If the transport is bought in i.e. the supplier employs the driver, then the transactions are prima facie in TOMS but this does not sound a likely scenario. 

Martin Pooley

Thanks (1)