Is there VAT on train tickets? Like all of life’s great questions, the answer is not as simple as it first appears.
Value Added Tax rates on expenses such as train tickets and train travel is usually zero percent. But there’s a big difference between zero-rated and being exempt from VAT taxation.
Keep reading to learn more about VAT on train travel, other forms of public transportation and how to account for VAT.
Are train tickets subject to VAT in the UK?
Train tickets in the UK fall under the zero-rated category. This means as a business you need to keep track of the 0% VAT you’re paying on train travel in your VAT returns.
It may sound like being exempt from VAT – for example, the government considers certain items, like postage stamps, entirely outside the scope of VAT. However, zero-rated is a vastly different thing, and it’s important to know the distinction.
When an item is zero-rated, businesses can claim back VAT on related purchases, which benefits their cash flow without them having to charge their customers extra – an advantage which VAT exempt items don’t have.
Reclaiming VAT on zero-rated supplies is what makes zero-percent VAT such a favourable tax rate. You can claim all the benefits without the drawback of charging your customers extra.
Is there VAT on public transportation in the UK?
Domestic UK transport is usually 0% VAT so long as the vehicle, ship or aircraft has at least ten seats, including those for the driver and crew.
This includes:
- Pleasure cruises
- Cliff lifts
- Excursions by coach or train (including steam railways)
- Horse-drawn buses
- Mystery coach or boat trips
- Sightseeing tours
- The transport element of park-and-ride schemes designed to reduce traffic congestion in city centres
But there are some exceptions to this rule, which often focus on whether the transport you’re supplying is to an event, experience or entertainment that you also own. In that case, you’ll need to charge the standard rate of VAT on the transport.
According to HMRC’s website, this concerns:
- Transport services when they’re included in the admission price to a place of entertainment, historic or cultural interest like a theme park or museum.
- The use of any vehicle to, from or within a place of entertainment, historic or cultural interest, if the transport and admission are supplied by the same or by connected persons
- Transport in any motor vehicle between a car park or its vicinity and an airport passenger terminal or its vicinity, when the car parking facilities are supplied by the same or connected persons
- Flights for entertainment or the experience of flying and not primarily to transport people from one place to another
VAT on other forms of transportation in the UK
Usually, passenger transport in a vehicle that can only accommodate less than ten passengers is subject to standard-rated VAT. The standard rate of VAT in the UK is 20%.
As a rule of thumb:
- More than ten seats: Probably zero-rated
- Less than ten seats: Probably the standard rate
But let's take a closer look.
Is there VAT on Uber and taxis?
Yes, there is usually VAT on taxi fares at the standard rate unless the taxi driver is self-employed and not registered for VAT. So it’s always worth asking for a VAT receipt.
Most Uber drivers are self-employed and earn under the VAT threshold. This means you’re less likely to get any sort of VAT return through Uber, whereas lots of taxi drivers work for larger firms that will have to charge VAT.
You’ll also be charged VAT on other parts of a taxi journey like:
- Baggage
- Waiting time
- Administration charges
Tipping a taxi or Uber driver isn’t regarded as payment for a supply, meaning the tip is outside the scope of VAT.
Is there VAT on ferry travel?
So long as the ferry in question can carry more than ten people at a time, it’s usually zero-rated for VAT purposes.
There is an exception to this rule for boat rides to, from, or within a place of entertainment or cultural interest. In these cases, the tickets are subject to standard-rated VAT. Ferries, canal boat trips and similar boat excursions that do not have additional facilities and take place on the open sea or other waterways accessible to the public are zero-rated for VAT.
Is there VAT on buses?
Just like train tickets and other forms of public transport, VAT for buses is zero-rated. Any travel expenses relating to a bus journey must be entered as zero-rated in your accounting software, and not exempt.
But remember: if the cost of bus fare is included with the right of admission to a place of entertainment or provided by the same provider, then it’s standard rate VAT.
Is there VAT on coaches?
Coach tickets do not have VAT added to their price because coach travel is considered an essential service that is zero-rated for VAT. However, certain things you buy during a coach journey, like onboard food and entertainment, may have VAT included in their cost.
Is there VAT on flights?
Public flights in the UK are VAT-free, so you don't have to pay or charge VAT on a flight ticket. However, they’re not complete tax exemptions: you're still subject to Air Passenger Duty (APD) that airlines include in the ticket pricing.
The amount of APD taxation depends on how far you're flying and the class you choose. Domestic flights are taxed for both the outbound and return trips, while international flights are only taxed on the outbound leg from the UK. Unlike VAT, you can't reclaim APD, except when you book a flight but end up not using it. In that case, you can reclaim the APD from the airline by filling out a form.
Private flights with less than ten passengers, or pleasure flights that are designed for an experience rather than transportation, are an exception and still subject to the standard 20% VAT rate.
How do VAT refunds work for travel expenses?
Businesses claim all VAT refunds for travel expenses by completing the appropriate sections on their VAT return. If the amount of VAT you’re claiming exceeds the amount of VAT you owe, then the government will pay you back the difference in the form of a VAT refund.
In practice, this looks like:
- Making sure you’re VAT registered.
- Ensuring you have valid VAT invoices for all your postage expenses.
- Keeping accurate records of your input VAT.
- Filing your VAT returns on time and including postage costs.
You’ll then receive a VAT refund that includes VAT charged as part of travel expenses if you’ve shelled out more on VAT for things you’ve had to buy as a business, versus things you’ve sold as a business.
Remember that to be eligible for a refund you must meet all the necessary VAT compliance rules and regulations. HMRC may review your VAT refund claim and request additional documentation or information to support your claim. To make sure you’re eligible, it's essential to maintain accurate records and be prepared to provide any relevant documentation.
Learn more about how to account for VAT.
Pleo and train tickets? A match made in heaven
Managing expenses related to travel can be a hassle, especially when it comes to understanding and managing VAT. Pleo can help you:
- Centralise expense data: Say goodbye to time-consuming expense reports and manual errors.
- Simplify expense reimbursement: Streamline your reimbursements, whether out-of-pocket, mileage or per diem.
Automate receipts for TfL journeys: Auto-generate tickets for your TfL journey and combine all your trips in one day into one ticket.