Duty and Tax paid
VAT is a complex tax on sales for businesses operating from permanent bases in the EU but the rules that apply to mobile operators (i.e. businesses which supply goods and services on ships and aircraft) are particularly difficult and onerous. As they operate in and between a number of different Member States, mobile operators are required to register and account for VAT in every single State they serve and, while VAT rules in the EU should be harmonised, across the Member States there are differences in interpretation of the legislation and in how the tax is administered.
The UKTRF is closely monitoring a number of VAT issues which particularly affect mobile operators, including VAT on catering and restaurant services. Currently, some Member States apply VAT to restaurant and catering services on board ships and aircraft on intra-EU journeys, but a number, including the UK, do not require VAT to be charged. In an attempt to harmonise the way VAT is charged on onboard supplies, the EU Commission asked PricewaterhouseCoopers (“PWC”) to undertake a study on the issues arising from taxing the supply of goods and the supply of services, including restaurant and catering services on board ships and aircraft. The study took two years to complete and a report was finally published by the EU Commission in January 2013. Due to the complexity of the issues identified by PWC, the EU Commission decided at this stage not to make specific legislative proposals. Consequently, the current national rules regarding the application of VAT on goods supplied for consumption during a flight and onboard catering and restaurant services will continue to apply, which means that the UK’s relief from VAT for catering on board ships and aircraft on journeys from the UK to other EU member states still stands.
More information on the VAT treatment of catering can be found on the HMRC website.