Flying is not merely a trip. It can be the beginning of a new business adventure. The specifics of the ticket prices are a surprise amid the adventure of travelling. Most of the time, it is not clear because of some hidden taxes and fees.

The most frequent question is “Is VAT charged on flights in the UK? It is a question of knowing what the real price of flying is without the fear of the surprise cost. Let’s take the flight to explore what you will find are the facts behind the price of your next flight regarding VAT.

Get in touch with our young, clever, and tech-driven professionals if you want to choose the best guide for VAT on flights in the UK.

How Does VAT Apply to Domestic Flights?

In the UK, domestic commercial passenger flights are generally zero-rated for VAT, meaning that while they are within the scope of VAT, the rate applied is 0%. This means airlines do not add VAT to the ticket price paid by passengers, although they can still reclaim VAT on their related business expenses. Instead of VAT, a tax called Air Passenger Duty (APD) is included in the ticket cost for flights departing from UK airports, with rates depending on factors like distance and travel class.

While the ticket price for UK domestic flights does not have VAT, some additional services provided by airlines may carry this charge. For example, buying an in-flight meal is subject to standard-rate VAT. However, other charges, like seat upgrades, overweight baggage, and booking fees charged by the airline, are treated as supplements to the zero-rated transport fare and are therefore also zero-rated.

Are International Flights Subject to VAT?

In the UK, the VAT treatment of private and chartered flights depends on several factors:

• International Flights: Passenger transport for international flights is generally zero-rated to the extent the journey takes place within the UK, provided the transport is scheduled to stop in another country.
• Domestic Flights (within the UK):
  • Large Aircraft: Flights using aircraft designed or adapted to carry 10 or more passengers (including crew) are zero-rated for VAT.
  • Small Aircraft: Flights using smaller aircraft, such as some helicopters or propeller planes, that carry fewer than 10 passengers are generally subject to the standard rate of VAT (currently 20%), as they do not meet the criteria for zero-rating.
  • Scheduled Flights: Regardless of aircraft capacity, all scheduled flights are zero-rated for VAT. A scheduled flight operates according to a published timetable or with systematic regularity.
• Air Passenger Duty (APD): APD is also applied to passengers on private jet charters departing from a UK airport, often at a higher rate per passenger than for standard commercial economy flights, particularly for larger and heavier aircraft. The operator typically includes this in the charter price.

Note: The government has been consulting on potentially extending the scope of the higher rate of APD to cover all private jets. Be sure to check for updates on this change, as the legislation is under review.

What Flight-Related Services Are Subject to VAT?

In the UK, while the passenger transport element of many flights is zero-rated, several related services can be subject to VAT, typically at the standard rate (currently 20%).

Here are some flight-related services that may be subject to VAT:

• Excess Baggage Fees: Overweight baggage charges are generally considered an additional service and may be subject to VAT, depending on the airline and the specific route. According to HMRC internal manuals, while accompanied luggage is often treated as part of the zero-rated transport, if an additional charge is made for excess baggage, it is regarded as a supplement to the fare and is zero-rated if the fare is zero-rated. However, some sources suggest that airlines may add VAT to these fees for domestic routes in certain countries.
• Flights on Smaller Aircraft (Domestic): Domestic flights using aircraft designed or adapted to carry fewer than 10 passengers are generally standard-rated for VAT.
• “Fear of Flying” or Pleasure Flights: Services like “fear of flying” flights, airship rides, pleasure flights (where the aircraft departs from and returns to the same airport without landing elsewhere), and hot air balloon rides are subject to standard-rate VAT.
• In-flight Catering (if separately charged): If in-flight catering is provided as an extra for which a charge is made additional to the transport fare (e.g., in a restaurant or buffet car), it is standard-rated. However, if it’s included as an integral element of a scheduled passenger transport service and no extra charge is made, it’s subsumed in the zero-rated supply of transport.
• Aircraft and Aircraft Parts: The supply (sale, import, hire, lease) of aircraft that do not qualify as “qualifying aircraft” is standard-rated. According to GOV.UK, the repair, maintenance, modification, or conversion of parts and equipment for non-qualifying aircraft is also standard-rated.
• Handling Services: While handling services for qualifying aircraft are zero-rated when provided in a port or airport, HMRC internal manuals state that handling services provided in the UK for non-qualifying aircraft are standard-rated, unless supplied to an overseas business. Examples of handling services include landing, parking, housing fees, apron services, security, and fire services.
• Fuel for Private Pleasure Flying: Supplies of fuel (kerosene) specifically for private pleasure flying are eligible for the reduced rate of VAT (5%), provided certain conditions related to excise duty are met. Fuel for international journeys is zero-rated, while fuel for domestic journeys for commercial vessels may be VAT free under specific concessions.
• Intermediary Services: If the place of supply of an intermediary’s services is the UK, their supply is zero-rated if they make arrangements for the supply of space in a qualifying aircraft, or the handling, storage, or transport of goods imported or exported from the UK. Otherwise, they may be standard-rated.

It’s important to differentiate between zero-rated and exempt services. Zero-rated means VAT is charged at 0%, allowing businesses to reclaim VAT on related purchases. Exempt means the service is outside the scope of VAT entirely.

The rules can be complex, and specific exemptions and conditions apply based on the nature of the flight (commercial vs. private, domestic vs. international, scheduled vs. non-scheduled), the type of aircraft, and the specific service provided. It’s advisable to consult with a VAT specialist or HMRC guidance for detailed clarification on specific situations.

Are Booking Fees and Airport Transfers Taxed?

Never make a reservation without analysing the breakdown of charges, to avoid surprises later. Knowledge of a service fee and a tax that the government levies on you can be one of the key steps in prompt budgeting.

The Tax on Booking Fees

In the UK, the VAT charged on booking fees depends on the service being arranged. Fees for arranging zero-rated transport (such as most flights and train travel) are generally also zero-rated. However, for other services or holiday packages sold under schemes like the Tour Operators’ Margin Scheme (TOMS), VAT may apply to the fee.

The Tax on Airport Transfers

The VAT on airport transfers in the UK depends on the service. Transport in vehicles like taxis, ride-sharing services, and limousines (with fewer than 10 seats) is generally subject to the standard 20% VAT rate, though many individual drivers operate below the VAT threshold and do not charge it. Transport in larger vehicles, including minibuses and coaches with 10 or more seats, is typically zero-rated for VAT. Transfers supplied by the car park operator are also subject to the standard rate.

How Does VAT Affect Business Travel?

If you’re finalising a deal in a foreign country, your travel costs may include Value Added Tax (VAT), which could increase your expenses. The VAT rate is not always 20% and varies by country and service. For UK VAT-registered business travellers, the impact of VAT varies. While VAT can often be reclaimed on accommodation and car hire, the cost of flights is zero-rated (no VAT is charged). Strict rules apply to reclaiming VAT on meals, especially when entertaining clients.

For domestic travel, a VAT-registered business can reclaim VAT on many expenses, but not on zero-rated items like train and plane tickets, as no VAT is charged on these fares. For trips to other countries, businesses cannot claim foreign VAT on their UK VAT return, but can often claim a refund directly from the tax authority in the country where the expense was incurred, subject to local rules and conditions. Since Brexit, UK businesses needing to recover VAT from EU countries must use the process for non-EU businesses (the 13th Directive). The rules and processes vary between individual EU countries. Poor record-keeping is a common reason why businesses fail to reclaim all the VAT they are entitled to.

Can Businesses Reclaim VAT on Flights and Related Costs?

You cannot generally reclaim VAT on flights in the UK because most passenger transport services, including flights and train tickets, are zero-rated for VAT. This means no VAT is charged in the first place, so there’s nothing to reclaim. Air Passenger Duty may be charged to the airline, but it’s a separate tax and not reclaimable on your VAT return.

However, you can reclaim VAT on related costs, such as:

• Accommodation: VAT paid on hotel stays and other accommodations during business trips.
• Car Hire: VAT on car hire for business travel.
• Fuel: VAT on fuel used for business travel in company vehicles or employees’ own cars (you can reclaim the VAT on the fuel portion of mileage allowance, not the full allowance).
• Meals: VAT on meals that qualify as ‘subsistence’ during business trips.
• Taxis: VAT on taxi fares if the taxi company is VAT registered.

Conditions for Reclaiming VAT on Related Costs

• Business Purpose: The expense must be solely for business purposes, such as visiting clients or attending meetings.
• Valid VAT Invoices: You must have proper invoices showing the VAT amount, and the bills must be addressed to the company, not individual employees.
• VAT Registration: Your company must be VAT registered to reclaim VAT.
• No Flat Rate Payment: You cannot reclaim VAT if you pay employees a flat rate for expenses

Common Misconceptions About VAT on Flights

Here are some common misconceptions about VAT on flights in the UK:

VAT is included in the price of a standard flight ticket.

Reality: Most passenger flights (domestic and international) are zero-rated for VAT in the UK. This means the fare does not include VAT, and there’s nothing to reclaim on a VAT return.

Zero-rated means the same as VAT-exempt.

Reality: These are distinct. Zero-rated means VAT is charged at 0%, allowing the supplier (airline) to reclaim VAT on related business expenses. VAT-exempt supplies do not allow input VAT recovery.

Air Passenger Duty (APD) is the same as VAT.

Reality: APD is a separate tax levied by the government on flights departing from UK airports. It is typically included in the ticket price but is not VAT.

Businesses can reclaim APD.

Reality: Unlike VAT, APD generally cannot be reclaimed by businesses. The only exception is if a flight is booked and paid for, including APD, but the ticket is ultimately not used. In this case, the APD can be reclaimed from the airline.

All flights are zero-rated for VAT.

Reality: While most public passenger flights are zero-rated, some specific types are subject to the standard 20% VAT rate. These include private flights in aircraft designed for fewer than 10 passengers (like small planes and helicopters) and flights purely for entertainment purposes (e.g., pleasure flights, airship rides, hot air balloon rides).

Bottom Line

UK businesses cannot reclaim VAT on flights as flights are typically zero-rated. There is no VAT on the price of the ticket, and hence nothing to reclaim. But businesses can reclaim VAT on flight-related services like accommodation, car rentals, and parking fees, etc.

In the matter of business travel, the key is to be careful with your documents. Ensure you maintain your receipts and invoices. If there is no VAT applied, nothing can be claimed back. To reclaim VAT, focus on those expenditures that are eligible, like hotels and car hire, and ensure you have VAT receipts from your company name in proper form.

Reach out to our intelligent and clever-minded guys to get the answer to your queries in the UK, we will get to your answers quickly. We will help to decide how to deal with your tax implications.

Disclaimer: The information about whether VAT on flights is provided in this blog includes text and graphics of a general nature. It does not intend to disregard any of the professional advice.