VTRANS120100 - Repair, maintenance, modification and conversion of ships and aircraft and their parts: Law

The law relating to the zero rate for the repair and maintenance, modification or conversion of ships and aircraft is in the VAT Act 1994, Schedule 8, Group 8, items 1 and 2: Items 2A and 2B dealing with the supplies of parts themselves are covered in VTRANS130000.

  1. The supply, repair or maintenance of a qualifying ship or the modification or conversion of any such ship provided that when so modified or converted it will remain a qualifying ship.
  2. The supply, repair or maintenance of a qualifying aircraft or the modification or conversion of any such aircraft provided that when so modified or converted it will remain a qualifying aircraft.

Notes:

(A1) In this Group -

  1. a “qualifying ship” is any ship of a gross tonnage of not less than 15 tons which is neither designed nor adapted for use for recreation or pleasure; and
  2. a “qualifying” aircraft is any aircraft which
  • (i) is used by an airline operating for reward chiefly on international routes, or
  • (ii) is used by a State institution and meets the condition in Note (B1).

(B1) The condition is that the aircraft.

  • (a) is of a weight of not less than 8,000 kilograms, and
  • (b) is neither designed nor adapted for use for recreation or pleasure.

(B2) In Note (A1)(b).

  • “airline”. means an undertaking which provides services for the carriage by air of passengers or cargo;
  • “State institution” has the same meaning as in Part B of Annex X to the Council Directive of 28 November 2006 on the common system of value added tax (2006/112/EC) (transactions which member States may continue to exempt).

Comments

1 January 2011

The wording of legal note (A1) (b), defining a qualifying aircraft was amended with effect from 1 January 2011. The previous wording was:

a “qualifying aircraft” is any aircraft of a weight of not less than 8,000 kilogrammes which is neither designed nor adapted for use for recreation or pleasure.

Guidance on the policy following the change is in VTRANS110600.

1 January 1996

The wording of items 1 and 2 were varied to their current form, and Note A1 was introduced, by the Value Added Tax (Ships and Aircraft) Order 1995, SI 1995/3039, with effect from 1 January 1996, following the implementation of the Second Simplification Directive (EC 95/7). The Directive introduced new rules on work on goods which meant that all such supplies became supplies of services, where some work on goods had previously been deemed to be supplies of goods. The order had the effect of extending the wording of UK law to include modification and conversion of qualifying ships in the relief. This did not represent a change of liability, since we had previously seen such supplies as the zero-rated supply to a ship.