VTRANS110650 - The supply of ships and aircraft: aircraft: aircraft management companies
Overview
The activities of aircraft management companies vary quite widely and the correct treatment will depend on the contractual facts. However, this is an area that has been reported as causing the industry some difficulty and the following general points try and assist in setting the perspective.
The specific area of difficulty is where, as part of the management arrangement, the aircraft are available to be used by the management company on their own account.
Air Operator Certificate
Management companies (acting as such) are not generally making supplies of transport and do not require an Air Operator Certificate AOC (VTRANS110610) to fulfil that function. Many will in fact hold such certificates because they also provide transport services. Officers need to be alert to claims that because the management company holds an AOC it is defacto an airline and the planes it has recorded on its AOC can be qualifying aircraft. Further examination of the arrangement and facts for each aircraft needs to be made.
Typical management scenarios
A corporate jet is owned by a business and the management company maintains the aircraft, the aircraft may be recorded on the management companies AOC and insurance certificate. This is not a supply of transportation and the management company is not an airline for this purpose.
The management company may also provide flight crew to enable the owning company to fly its executives to meetings. Again this is not a supply of transportation services and the management company is not an airline for this purpose.
In addition to managing the aircraft the management company may also be allowed to use the plane on an ad-hoc basis to provide transport services to 3r d parties as principle. Here it is possible that the business will be operating as an airline and there is a requirement to hold an AOC.
Place of supply
Aircraft management is a service and it will be important to establish the place of supply of the services as the aircraft owners are often outside the UK. This applies equally to supplies made by the management company to the aircraft owner and, where appropriate, any leasing by the owner to the management company of the aircraft.
See VATPOSS for further guidance on place of supply.
Leasing to management company
As above, some aircraft management companies are allowed to use the aircraft in their charge to make supplies on their own account. This may allow the management company to be treated as an airline (VTRANS110640). In many cases the use is ad-hoc with differing degrees of formality or regularity, in HMRC’s view such arrangement does not allow the aircraft to become ‘qualifying‘ as being an aircraft used by an airline. This is because the aircraft has, at best, dual use and in most cases the predominant and main use of the aircraft is for the benefit of the owner; the ability to lend helping to defer costs.
A-Oy (ECJ C-31/11) Paragraph 57 confirmed that the aircraft must be for the “exclusive use” of an airline for the zero rate to apply.
Management supplies
Aircraft management supplies maybe eligible for zero-rating, if the supplies meet the direct needs of a qualifying aircraft (VTRANS140000). It will also be important to consider whether there are a range of different [multiple] supplies of different liabilities.
Importation of an aircraft by management companies
Where an aircraft is imported and a declaration made then there will be a need to test of whether the aircraft is qualifying or not and thus whether VAT is due. It should be noted that there is no direct linkage between the liability to pay VAT and the liability to pay duty: the tests are independent of each other.
Importers that are not owners of the aircraft need to be aware of VAT Act 1994, Section 27 which restricts the right to deduct input tax where there is some non-business use of the aircraft. This is covered in more detail in Notice 703 paragraph 2.3.
See also IMPS - Imports.