Train Hire for the Purpose of Providing Santa Specials

VAT Question

My client is a historic railway. In previous years they have sold Santa Specials; however, this year a third-party company will organise and sell the Santa Specials to the end customers. My client will be hiring the train plus crew to the company. The third-party company has stated my client should not be charging VAT because Santa Specials are zero-rated.

VAT Answer

Whilst HMRC accept that Santa Specials can be zero-rated (*subject to the conditions in HMRC guidance, an issue which is worthy of further discussion in its own right), your client is not selling a Santa Special; they are supplying a train and crew to operate the train. However, further consideration is needed to determine whether this is a zero-rated supply of passenger transport. If the journey that will be undertaken is not for the purpose of transporting passengers for location A to location B, but in this case it is transport from location A on a round trip with no stops, arriving back at location A, there is significant doubt that this is a supply of passenger transport.

In Blackpool Pleasure Beach Co. (1974 STC 138), as referred to by HMRC’s VAT Transport manual (VTRANS020400), Lod Widgery commented, “In my view, the essence of the transport of passengers is the carriage of a passenger from A to B, and perhaps from B to C. I am fully conscious of the fact that there are such things as return tickets and roundtrips, and that a person setting out to go from A to B may nevertheless retrace his steps or continue his journey in such a way as to end up in the end at A again. But the essence… of transport of passengers is that the passenger is taken from A to B because he wants to be at B or because there is some purpose in being at B, and if he then goes on from B to C, his carriage may still be transport of a passenger because he wants to be at C and so on. I cannot accept that a person who in effect remains on one spot all the time is on any view to be considered under the head of being transported as a passenger. I think the words of the schedule, in their ordinary meaning, must necessarily exclude movement, which in effect is confined to a single point and does not involve the deliberate movement or transfer of a passenger from one point to another.”

Based upon the reasoning given in the Blackpool Pleasure Beach case, it is my view that on this occasion, as there is no “deliberate movement or transfer of a passenger from one point to another,” the supply being made by your client is liable to VAT at the standard rate.

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