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You are here: Home » Deal insight » UK starts charging VAT on business jets

UK starts charging VAT on business jets

publication date: Jan 21, 2011

On 1 January 2011 the UK's VAT rules in relation to the supply of aircraft, aircraft engines and parts changed substantially. This followed a ruling by the European Commission that the UK's previous rules did not correctly implement the provisions of the EU VAT Directive (Council Directive EC 2006/112).

The UK rules previously provided that any supply of an aircraft with a take-off weight exceeding 8,000 kg and which was neither designed nor adapted for recreation and pleasure should be zero-rated (and the rule applied also to engines and parts for such an aircraft). However, the zero-rated treatment provided for in the EU VAT Directive is tested by reference to the airline rather than the aircraft, applying to supplies of aircraft and parts that are "used by airlines operating for reward chiefly on international routes". This test has now been implemented in the UK by section 21 of the Finance (No.3) Act 2010.

Clyde & Co's Mark Bisset and Phil Norton outline the main issues for owners of business jets.

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