With a standard VAT rate of 20% in the UK you could be losing out on valuable cash and profit in your business if you do not reclaim VAT on your travel expenses where possible.
But it’s not always obvious when you can claim VAT, for example, small business owners often question whether there is VAT on train tickets in the UK.
It’s no surprise there is this confusion around VAT on rail tickets, buses, taxis, Ubers, and planes. 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.).
Is there VAT on train tickets? There is no VAT on train tickets in the UK. Train and rail tickets and other public passenger transport generally tend to be zero-rated for VAT purposes. There are however some exceptions to the rules.
We are sure you have better things to do than try and understand the complexities of the UK tax system. So, if you have ever been left scratching your head wondering whether train tickets VAT zero or exempt and how to manage these expenses, read on.
VAT on train tickets and other travel expenses
Not claiming VAT on train tickets and other business expenses can impact the cash you have in your business and the amount of money you have available to pay yourself through profits. Consider this simple example of claiming missed VAT:
| Purchases in the year | £12,000 |
| VAT | £2,000 |
| Cost to business | £10,000 |
| Additional Cash | £2,000 |
| Additional Profit | £2,000 |
Getting this wrong can add up to a sizeable amount of money across the financial year. It is always best to double-check receipts and invoices for evidence of VAT. This isn’t always easy as there are many exceptions to the rules when it comes to VAT and how it is displayed on receipts and invoices.
Below we have provided guidance on some of the common expenses including train tickets, Ubers, taxis, planes, and buses and the applicable VAT treatment.
Are train tickets VAT zero or exempt?
Train tickets are VAT zero, and not VAT exempt.
Domestic passenger transport in any vehicle, ship or aircraft that has at least 10 seats, including those for driver and crew can be zero-rated for VAT unless the supply is an exception from zero rates in which case it will be charged at the standard-rate VAT.
This generally tends to be if the supply of transport includes the right to admission to a museum, theme park, zoo, or other places of entertainment.
Do not confuse exempt with zero-rated.
Whilst they both may attract a £0 VAT charge, they are different.
When entering your train ticket purchases into your accounting records make sure to use the zero-rated option instead of exempt.
Is there VAT on trainline tickets?
There is no VAT on Trainline tickets. This is because Trainline sells tickets to you on behalf of the Rail and Coach providers and does not charge VAT on your Rail and Coach travel, as such, the VAT is the responsibility of the Rail and Coach providers.
Is there VAT on railcards and rail tickets?
No, there is no VAT on railcards.
Public passenger transport is zero-rated for VAT purposes. As such, there is no VAT to be reclaimed on railcards. The same goes for other forms of public transport.
Is there VAT on taxi fares?
There are specific rules that apply to VAT on taxis and private hire cars. Private hire cars from a VAT perspective are often referred to as mini-cabs.
The fares charged to passengers for taxi or private hire journeys are liable to VAT at the standard rate. Tips voluntarily given are not regarded as payment for a supply and are outside the scope of VAT i.e. you cannot reclaim VAT on a tip paid to the taxi driver.
Whilst this may seem straight forward it does get a bit more complicated depending on whether the taxi driver is self-employed, employed through the taxi firm or use the agency services of a taxi business.
The way in which the taxi driver operates could determine whether VAT is charged or not. As such always get a receipt and look out for the VAT amount or VAT number as an indicator of whether you can reclaim the VAT or not.
There is no hard and fast rule with reclaiming VAT on taxi fares as the structure of the taxi drivers’ service can impact the VAT treatment.
Is there VAT on bus tickets?
No, there is no VAT on bus tickets. Just like train tickets and other public transport costs, bus and coach fares are zero-rated for VAT so you cannot reclaim anything on them.
Is there VAT on the TFL congestion charge?
The London Congestion Charge and the Ultra-Low Emission Zone (ULEZ) Charge are both outside the scope of VAT as non-business statutory levies imposed by Transport for London.
With Auto Pay, payment of these statutory charges is taken automatically for the number of charging days a vehicle travels within the Congestion Charge zone during charging hours and if it doesn’t meet the emissions standards, the ULEZ.
An annual £10 registration charge applies to each vehicle added to Auto Pay.
The registration charge follows the VAT treatment of the statutory levies and is therefore outside the scope of VAT. Auto Pay does not represent a separate supply made by TfL to the road user.
Handy Hint: We recommend that you always keep any travel receipts to help you process your business expenses properly.
Is there VAT on Uber?
Uber is considered a contractor in the provision of private hire services with the driver. In a recent High Court ruling this means that Uber is now required to charge standard rate VAT on the whole provision of the ride and not just the commission it charges drivers who find work through its app.
That means the whole of the service is standard rated and you can reclaim the VAT on your Uber provided the cost was a genuine business expense.
You can download a copy of your invoices by logging in at riders.uber.com/trips:
- Go to My Trips.
- Select your trip.
- Select view detail.
- Download invoice from the top right-hand corner.
Is there VAT on plane tickets?
Scheduled flights and plane tickets are zero-rated for VAT purposes. A scheduled flight is one that runs either according to a published timetable or so regularly or frequently as to constitute a recognisable systematic series of flights.
Zero-rating applies to all scheduled flights irrespective of the carrying capacity of the aircraft.
As you would probably have gathered by now there are a few spurious exceptions to that rule. If the provision of transport is part of a package or inclusive tour, which includes facilities, bought in from third parties, there may be VAT to account.
The following examples are standard rated, although the list is not exhaustive:
- ‘Fear of flying’ flights.
- Airship rides.
- ‘Flights to nowhere’ and similar pleasure flights where the aircraft returns to the airport of departure without an advertised landing and disembarkation of passengers at another airport.
- Hot air balloon rides.
Is there VAT on parking?
Charges for parking are normally subject to VAT.
However, on-street parking is operated by the Local Authority and is covered by statute. Because of this, there is no VAT on on-street parking charges.
Always check the ticket for evidence. If there is a VAT number on the parking ticket the company operating the car park is VAT registered and you can reclaim VAT at the standard rate.
The amount of VAT on your parking may not be detailed on the ticket as legally you do not need to provide the breakdown on receipts under the value of £100. That does not mean that there is no VAT to reclaim but you may have to calculate it yourself.
Example
- Car park ticket: £4.00
- Net of VAT (/1.2): £3.33
- VAT: £0.67
Frequently asked questions on whether there is VAT on train tickets
Is a train ticket a VAT receipt?
Yes. It is a receipt and proof of purchase for the services provided. Although there is no VAT charged as the rate of VAT is zero-rated it would still be deemed a VAT receipt.
The purchase should be entered into your accounting records as zero-rated with £0 VAT reclaimed.
Are train tickets zero-rated for VAT
Yes. Although there is no VAT charged as the rate of VAT is zero-rated it would still be deemed a VAT receipt. The purchase should be entered into your accounting records as zero-rated with £0 VAT reclaimed.
How do I get an invoice for my train ticket?
Where VAT is charged on Rail and Coach, this will either be shown on your ticket, or you can obtain an invoice directly from the Rail and Coach provider if you need to recover VAT for your business.
Trainline does not charge VAT on the booking fees applied, this is shown on the email confirmation and the receipt available from the app or website, both can be used as a VAT receipt.
Is there VAT on travel expenses?
That depends on whether the travel expense is considered passenger transport. If the travel expense is considered passenger transport, then it is most likely zero-rated. There are exceptions so please double-check guidance.
There are also situations that qualify as standard-rated passenger transport and related services which may attract VAT at the standard rate.
Conclusion
As a rule of thumb must public passenger transport such as buses, coaches and trains will be zero-rated for VAT purposes provided they meet the 10-passenger rule.
There are exceptions to the rules as always when it comes to HMRC. It is always worth double-checking to avoid falling foul of an exception to the rule. You cannot rely on a standard way of claiming VAT as shown by the VAT on taxi fares which differs depending on the way the supply is provided.
One size does not fit all.
As we have seen with Uber and the recent court case it is also worth checking to see if there has been a change in legislation or case law which might impact how you have been claiming VAT.
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Jon has been in business since 1999, and in that time worked with more than 300 small business clients. As well as being an accountant, he is also an early adopter of tech, and has helped small businesses to leverage the power of their computer systems by creating software to automate and simplify accounting tasks.
