Statutory Instruments
1995 No. 3039

VALUE ADDED TAX
The Value Added Tax (Ships and Aircraft) Order 1995

Made
28th November 1995

Laid before the House of Commons
28th November 1995

Coming into force
1st January 1996

The Treasury, in exercise of the powers conferred on them by section 30(4) of the Value Added Tax Act 1994(1) and of all other powers enabling them in that behalf, hereby make the following Order:

1.  This Order may be cited as the Value Added Tax (Ships and Aircraft) Order 1995 and shall come into force on 1st January 1996.

2.  Group 8 (Transport) of Schedule 8(2) to the Value Added Tax Act 1994 shall be amended as follows—

(a)For Item 1 there shall be substituted—

“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.”;

(b)For Item 2 there shall be substituted—

“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.”;

(c)After Item 2 there shall be inserted—

“2A.  The supply of parts and equipment, of a kind ordinarily installed or incorporated in, and to be installed, or incorporated in,—

(a)the propulsion, navigation or communication systems; or

(b)the general structure,

of a qualifying ship or, as the case may be, aircraft.

2B.  The supply of life jackets, life rafts, smoke hoods and similar safety equipment for use in a qualifying ship or, as the case may be, aircraft.”;

(d)In Item 10—

(i)at the end of paragraph (a) delete “or”;

(ii)in paragraph (b) for “items 1 to 9 and 11” substitute “items 1 and 2, 3 to 9 and 11; or”; and

(iii)after paragraph (b) insert—

“(c)the supply of any goods of a description falling within items 2A or 2B.”;

(e)Before Note (1) there shall be inserted—

“(A1) In this Group—

(a)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

(b)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.”;

(f)In Note (1) before the word “ship” where it first appears there shall be inserted the word “qualifying”;

(g)In Note (2) after “2” there shall be inserted “, 2A, 2B”;

(h)After Note (2) there shall be inserted—

“(2A) Items 2A and 2B do not include the supply of parts and equipment to a Government department unless—

(a)they are installed or incorporated in the course of a supply which is treated as being made in the course or furtherance of a business carried on by the department; or

(b)the parts and equipment are to be installed or incorporated in ships or aircraft used for the purpose of providing rescue or assistance at sea.”;

(i)In Note (7) for the words “do not include the supply of any services where the ships or aircraft referred to in those paragraphs are of the descriptions specified in paragraphs (a) and (b) of item 1 or in paragraphs (a) and (b) of item 2”there shall be substituted “only include supplies of services where the ships or aircraft referred to in those paragraphs are qualifying ships or, as the case may be, aircraft.”.

Derek Conway
Simon Burns
Two of the Lord Commissioners of Her Majesty’s Treasury
28th November 1995

Explanatory Note

(This note is not part of the Order)
This Order, with effect from 1st January 1996, varies Group 8 of Schedule 8 to the Value Added Tax Act 1994. The changes are partly as a consequence of the amendment of Article 5 of Council Directive 77/388/EEC (OJ No. L145, 13.6.1977, p.1) (“the Sixth VAT Directive”) by Article 1(1) of Council Directive 95/7/EC (OJ No. L102, 5.5.1995, p.18) (“the Second VAT Simplification Directive”), and partly to give statutory effect to the zero-rating of certain supplies of parts and equipment for ships and aircraft which are themselves zero-rated (“qualifying”ships and aircraft).
Articles 2(a) and 2(b) of the Order substitute new items 1 and 2 which maintain zero-rating for the modification and conversion of qualifying ships and aircraft.
Article 2(c) introduces new items 2A and 2B which extend zero-rating to supplies of certain parts and equipment for qualifying ships and aircraft.
Article 2(d) amends item 10 of Group 8 to extend zero-rating to the making of arrangements for the supply of the parts and equipment zero-rated under new items 2A and 2B.
Article 2(e) introduces a new Note (A1) which defines “qualifying ships”and “qualifying aircraft”for the purposes of Group 8.
Article 2(f) amends note (1) as a consequence of the amendment of items 1 and 2 of Group 8.
Article 2(g) amends Note (2) to provide zero-rating for the letting on hire of the goods zero-rated under the new items 2A and 2B.
Article 2(h) introduces a new Note (2A) to exclude certain supplies of parts and equipment to Government departments from zero-rating under the new items 2A and 2B.
Article 2(i) amends Note (7) as a consequence of the amendment of items 1 and 2 of Group 8.


(1)
1994 c. 23.

(2)
Group 8 was varied by S.I. 1994/3014 and S.I. 1995/653.