Is There VAT on Bus Tickets? (Exempt or Zero-Rated)

With the UK VAT rate currently standing at 20% it’s possible your business could be missing out on cash and profits if you don’t reclaim VAT on travel expenses. However, it’s not always obvious what expenses have VAT applied, for example, if there’s VAT on bus travel. 

Is there VAT on bus tickets? No, VAT is not charged on bus tickets, bus travel, and bus fares. This form of transport is classed as being zero-rated for VAT, and as such, you cannot claim back VAT on bus tickets for your company.

Just like train tickets and other forms of public transport, buses and coaches fall into the zero-rated category for VAT. Any travel expenses relating to a bus journey will need to be entered as zero-rated in your accounting software, and not exempt.

Interesting though, you can claim VAT on taxi fares at 20%. The exception to this is where the taxi driver is self-employed and not VAT registered. 

Handy Hint: We recommend that you always keep any travel receipts to help you process your business expenses properly.

The difference between VAT exempt and zero-rated

Bus fares have no VAT charge, but they are classed as being zero-rated for VAT. This is clearly stated in the government’s “The VAT treatment of passenger transport (VAT Notice 744A)” document, where it says:

If you transport or ferry vehicles on ships, trains, or other forms of transport you’re supplying passenger transport services when your transport meets the conditions at paragraph 2.1 and: transports the vehicles with passengers, for example a coach or bus, it does not matter whether or not you’re charging them the private car rate — the supply will be zero-rated.

But what is the difference between bus tickets being classed as exempt or zero-rated, as they are in this case? 

Both VAT treatments are preferential statuses that the government say can be applied to certain essential goods and services – such as bus or coach travel.

Do not confuse exempt with zero-rated. Whilst they both may attract a £0 VAT charge, they are different.

If you use a bus or coach company to travel to a destination for business purposes, you are not able to claim any VAT back. 

When entering your bus fare ticket expenses into your accounting records make sure to use the zero-rated option instead of exempt.

Handy Hint: For more detail we’ve written an extensive guide on the difference between zero rated and exempt VAT.

Is a bus ticket a VAT receipt?

Yes, a bus ticket is classed as a VAT receipt, despite no VAT being charged on the bus fare. The reason being, is that it’s a proof of purchase for the services provided. 

Although the bus ticket VAT rate is zero-rated it would still be deemed a VAT receipt for expenses and accounts purposes.

The purchase should be entered into your accounting records as zero-rated with £0 VAT reclaimed.

Is VAT charged on coach travel?

No, there is no VAT on coach tickets as coach travel is classed as a zero-rated essential service. However, some items you purchased during a coach journey will have VAT applied to them, such as on-board catering and entertainment. 

Conclusion

It’s no surprise there is this confusion about whether you can claim VAT on bus tickets. After all, in 2009 it was reported that the UK tax code had exceeded that of India and, at 11,520 pages was the longest in the world (Accounting Web, n.d.).  

Yep, it can be an accounting minefield.

However, now you know that you can’t claim VAT back on bus tickets, hopefully your accounting of travel expenses can be easier. 

You might also like…

• The TfL congestion change and how it relates VAT
• Can you claim back VAT on postage charges?

^{Image of the London bus via https://pixabay.com/photos/london-street-telephone-cabin-1567903/}