Publication date: 17 July 2012
Closing date for comments: 17 October 2012
Subject of this
consultation: |
The introduction of a reduced VAT
rate of 5 per cent for the transport of passengers by small
cable-suspended transport systems, such as ski-lifts,
chair-lifts and cable-cars. |
Scope of this
consultation: |
To consider how this change should
be implemented, what impact it may have and what administrative
burdens it may give rise to, and how its effectiveness should
be evaluated. |
Who should read this: |
Businesses and other taxpayers who
operate ski-lifts and similar forms of transport. |
Duration: |
Three months, from 17 July 2012 to
17 October 2012. |
Lead official: |
Colin Scott-Morton, HMRC |
How to respond or enquire about
this consultation: |
Responses to the consultation and
queries about the content or scope of the consultation should
be sent to:
Colin Scott-Morton, VAT Supply Team, HM Revenue & Customs,
Room 3C/07, 100 Parliament Street, London SW1A 2BQ. Tel 0207
147 0483. E-mail colin.scott-morton@hmrc.gsi.gov.uk. |
Additional ways to be
involved: |
As the number of businesses and
taxpayers affected by this change is expected to be small, we
are requesting written responses. However, if a meeting would
be helpful, please contact Colin Scott-Morton at the above
address to discuss arrangements.
Alternate format versions of this document are available on
request. Please contact Colin Scott-Morton at the above
address. |
After the
consultation: |
A response document will be
published in the autumn. |
Getting to this stage: |
The UK currently has a zero rate
of VAT for transport of passengers in any ‘vehicle’
capable of carrying not less than ten persons. Each chair,
gondola etc in a cable-suspended system is considered to be a
‘vehicle’ and, where such vehicles are not capable
of carrying ten persons, the standard rate of VAT applies.
Under EU law, it is not possible to extend the existing zero
rate to include these smaller vehicles. |
Previous engagement: |
None. |
Contents
1 |
Introduction |
2 |
Background |
3 |
How the change will be made |
4 |
Tax Impact Assessment |
5 |
Evaluation |
6 |
Summary of questions |
7 |
The Consultation Process: How to
respond |
Annex A |
The Code of Practice on Consultation |
Annex B |
Draft Legislation |
1. Introduction
At Budget 2012 the Government announced the application of a
reduced VAT rate of 5 per cent for the transport of passengers by
small cable-based transport systems, in place of the standard rate
which currently applies. Most cable-suspended transport systems carry
fare paying passengers from one point to another, but do not benefit
from the same VAT reliefs as most other forms of public transport.
The measure seeks to equalise the VAT treatment as far as possible
under EU law. This change will take effect in 2013 and any impact of
the reduced rate will be evaluated after three years.
This consultation seeks views on:
- how the change should be implemented;
- what impact it may have and what administrative burdens it may
give rise to; and
- how its effectiveness should be evaluated.
2. Background
UK law currently provides a zero rate of VAT for the transport of
passengers in any vehicle, ship or aircraft designed or adapted to
carry not less than ten passengers (VAT Act 1994, Schedule 8, Group
8, Item 4(a)). In a number of cases, the VAT Tribunal has considered
whether this zero rate can apply to cable-suspended transport
systems, such as ski-lifts, chair-lifts, cable-cars etc. In each
case, the Tribunal concluded that the term ‘vehicle’
applied to each chair, gondola, t-bar etc, rather than to the whole
system, and, as the capacity of most such ‘vehicles’ is
generally four or less, it follows that few such systems operating in
the UK currently fall within the zero rate.
While it is not possible to introduce a new zero rate or extend
the scope of existing ones, EU law provides for a reduced VAT rate,
of not less than 5 per cent, to be applied to the transport of
passengers (Directive 2006/112, Annex III, Category 5). This is the
provision under which the new reduced rate will be introduced in the
UK. The relief will be restricted to the supply of transporting
people by small cable-suspended transport systems. In line with
normal VAT principles it will not apply where the supply of transport
forms an ancillary part of a wider supply.
The term ‘small cable-suspended transport systems’
covers any means of transport comprising ‘vehicles’ (e.g.
chairs, gondolas, t-bars etc) suspended from a cable, with each
vehicle having a carrying capacity of less than ten persons (systems
with vehicles capable of carrying ten or more persons are covered by
the existing zero rate, as explained above). Typically this will
include systems designed to transport people up hills and mountains
and across rivers and valleys, such as ski-lifts, chair-lifts,
cable-cars etc. It will not include any surface-based systems, such
as travolators, escalators, funicular railways etc.
The reduced rate will apply only to the transport of passengers by
such systems. Where such systems are located in theme parks, open-air
museums, or similar locations and an overall charge is made for
admission (or for the use of the facilities including travel on the
cable-suspended system), the reduced rate will not apply.
3. How the change will be made
Legislation
VAT reduced rates are set out in Groups 1 to 11 of Schedule 7A,
VAT Act 1994. A new Group 12 will be added to Schedule 7A by Treasury
Order, to come into force after Budget 2013. A draft of the Order is
below at Annex B.
Question 1
Do you consider that the draft legislation will achieve the intended
policy effect with no unintended effects?
Publicity
Advance publicity of the proposed change was given at Budget 2012.
Further publicity will be provided in advance of the change coming
into force in 2013, and amendments will be made to VAT Notice 744A,
‘Passenger Transport’, to HMRC internal guidance, and to
relevant website content.
Question 2
Do you consider that this is sufficient to advise all those affected
of the proposed changes? If not, should additional, targeted
publicity be provided, and who should this be aimed at?
4. Tax Impact Assessment
The table below sets out the Government’s view on what the
impact of the legislative changes will be. This section gives all
interested parties the opportunity to comment on what impact the
changes will have and to point out anything that may have been
overlooked. In particular the Government invites comments from
charities, small businesses or bodies representing their
interests.
Summary of Impacts
Exchequer impact
(£m) |
2012-13 |
2013-14 |
2014-15 |
2015-16 |
2016-17 |
|
Negligible |
Negligible |
Negligible |
Negligible |
Negligible |
Economic impact |
This measure is
expected to have no significant economic impacts. |
Impact on individuals and
households |
Individuals using
cable-suspended systems may benefit from lower prices, but only
if operators choose to pass on the VAT reduction. |
Equalities impacts |
No equality groups
have been identified as being impacted by this change. |
Impact on businesses and Civil
Society Organisations |
Businesses may benefit
from increased patronage if they choose to pass on the VAT
reduction, or from increased profits if not. This in turn may
enable them to invest in improved facilities.
There are cable-suspended lifts within the five Scottish ski
resorts, and in a further three skiing areas in England. In
addition, there are cable-suspended lifts located elsewhere in
England and Wales. The reduced rate will only apply to the
small number of such systems where they are not subject to the
exclusions mentioned in section 2, or covered by the existing
zero rate.
There will be one-off costs for businesses in changing their
accounting systems to accommodate the new VAT rate. As we are
at the Consultation stage, we would welcome feedback from
businesses on the level of these costs. |
Impact on HMRC or other public
sector delivery organisations |
No significant impact
on HMRC costs. |
Other impacts |
Small firms are likely
to be affected by this change, and again, we would welcome
feedback on the potential impact.
Any policy change will also be tested against the list of
possible impacts used in regulatory impact assessments. The
full list of these “other impacts” is set out in
Annex A of Overview of Tax Legislation and Rates
available from http://www.hmrc.gov.uk/budget2012/ootlar.htm |
Question 3
Do you agree that the proposed change will have no impacts other than
those set out above? If not, what additional impacts do you think
will result from the proposed change?
5. Evaluation
The relief is restricted to cable-suspended transport systems
where the vehicles carry fewer than 10 people; transport in larger
vehicles already qualifying for the zero rate. As such, it is
deliberately narrow in its focus and targeted at these particular
means of transport. The extent to which a relief in this area has had
an impact will be evaluated after three years, at which time
stakeholders and other respondents to this consultation will be
asked:
- for an analysis of any benefits the reduced rate has
brought;
- for details of any administrative burdens arising from its
operation; and
- whether there is a case for its continuation.
At the same time, HMRC will carry out its own assessment of the
effect on tax revenues.
Question 4
Do you think the proposals above will result in a meaningful
evaluation of the effectiveness of this reduced rate? If not, what
other steps should be taken?
6. Summary of questions
From section 3 – How the change will be made
Question 1
Do you consider that the draft legislation will achieve the intended
policy effect with no unintended effects?
Question 2
Do you consider that this is sufficient to advise all those affected
of the proposed changes? If not, should additional, targeted
publicity be provided, and who should this be aimed at?
From section 4 – Tax Impact Assessment
Question 3
Do you agree that the proposed change will have no impacts other than
those set out above? If not, what additional impacts do you think
will result from the proposed change?
From section 5 – Evaluation
Question 4
Do you think the proposals above will result in a meaningful
evaluation of the effectiveness of this reduced rate? If not, what
other steps should be taken?
7. The Consultation Process
This consultation is being conducted in line with the Tax
Consultation Framework. There are 5 stages to tax policy
development:
Stage 1 Setting out objectives and identifying
options.
Stage 2 Determining the best option and developing a
framework for implementation including detailed policy design.
Stage 3 Drafting legislation to effect the proposed
change.
Stage 4 Implementing and monitoring the change.
Stage 5 Reviewing and evaluating the change.
This consultation is taking place during stage 3 of the process.
The purpose of the consultation is to seek views on draft legislation
in order to confirm, as far as possible, that it will achieve the
intended policy effect with no unintended effects.
How to respond
A summary of the questions in this consultation is included at
chapter 6.
Responses should be sent by 20 October 2012, by e-mail to colin.scott-morton@hmrc.gsi.gov.uk
or by post to:
Colin Scott-Morton,
VAT Supply Team,
HM Revenue & Customs,
Room 3C/07,
100 Parliament Street,
London SW1A 2BQ.
Or by fax to 0207 147 0097
Telephone enquiries 0207 147 0483 (from a text phone prefix this
number with 18001)
Paper copies of this document or copies in Welsh and alternative
formats (large print, audio and Braille) may be obtained free of
charge from the above address. This document can also be accessed
from the HMRC Internet site at http://www.hmrc.gov.uk/consultations/index.htm.
All responses will be acknowledged, but it will not be possible to
give substantive replies to individual representations.
When responding please say if you are a business, individual or
representative body. In the case of representative bodies please
provide information on the number and nature of people you
represent.
Confidentiality
Information provided in response to this consultation, including
personal information, may be published or disclosed in accordance
with the access to information regimes. These are primarily the
Freedom of Information Act 2000 (FOIA), the Data Protection Act 1998
(DPA) and the Environmental Information Regulations 2004.
If you want the information that you provide to be treated as
confidential, please be aware that, under the FOIA, there is a
statutory Code of Practice with which public authorities must comply
and which deals with, amongst other things, obligations of
confidence. In view of this it would be helpful if you could explain
to us why you regard the information you have provided as
confidential. If we receive a request for disclosure of the
information we will take full account of your explanation, but we
cannot give an assurance that confidentially can be maintained in all
circumstances. An automatic confidentiality disclaimer generated by
your IT system will not, of itself, be regarded as binding on HM
Revenue and Customs (HMRC).
HMRC will process your personal data in accordance with the DPA
and in the majority of circumstances this will mean that your
personal data will not be disclosed to third parties.
The Consultation Code of Practice
This consultation is being conducted in accordance with the Code
of Practice on Consultation. A copy of the Code of Practice criteria
and a contact for any comments on the consultation process can be
found in Annex A.
Annex A: The Code of Practice on Consultation
About the consultation process
This consultation is being conducted in accordance with the Code
of Practice on Consultation.
The consultation criteria
1. When to consult - Formal consultation should take place at a
stage when there is scope to influence the policy outcome.
2. Duration of consultation exercises - Consultations should
normally last for at least 12 weeks with consideration given to
longer timescales where feasible and sensible.
3. Clarity of scope and impact - Consultation documents should be
clear about the consultation process, what is being proposed, the
scope to influence and the expected costs and benefits of the
proposals.
4. Accessibility of consultation exercise - Consultation exercises
should be designed to be accessible to, and clearly targeted at,
those people the exercise is intended to reach.
5. The burden of consultation - Keeping the burden of consultation
to a minimum is essential if consultations are to be effective and if
consultees’ buy-in to the process is to be obtained.
6. Responsiveness of consultation exercises - Consultation
responses should be analysed carefully and clear feedback should be
provided to participants following the consultation.
7. Capacity to consult - Officials running consultations should
seek guidance in how to run an effective consultation exercise and
share what they have learned from the experience.
If you feel that this consultation does not satisfy these
criteria, or if you have any complaints or comments about the
process, please contact:
Amy Burgess, Consultation Coordinator, Budget & Finance Bill
Co-ordination Group, HM Revenue & Customs, 100 Parliament Street,
London, SW1A 2BQ
e-mail hmrc-consultation.co-ordinator@hmrc.gsi.gov.uk
Annex B: Draft Legislation
STATUTORY INSTRUMENTS
2013 No.
VALUE ADDED TAX
The Value Added Tax (Reduced Rate) (Cable-Suspended Passenger
Transport Systems) Order 2013
Made - - - - |
*** |
Laid before the House of Commons |
*** |
Coming into force - - |
*** |
The Treasury make the following Order in exercise of the powers
conferred by sections 29A and 96(9) of the Value Added Tax Act
1994.
Citation and commencement
1. This Order may be cited as the Value Added Tax (Reduced
Rate) (Cable-Suspended Passenger Transport Systems) Order 2013 and
comes into force on [DATE] 2013.
Amendment of Schedule 7A to the Value Added Tax Act 1994
2.—(1) Schedule 7A to the Value Added Tax Act 1994
(charge at reduced rate) is amended as follows.
(2) At the beginning of Part 1 (index to reduced-rate supplies of
goods and services) insert—
“Cable-suspended passenger transport
systems……………………Group
12”.
(3) At the end of Part 2 (the groups) insert—
“GROUP 12
CABLE-SUSPENDED PASSENGER TRANSPORT SYSTEMS
Item No.
1. Transport of passengers by means of a cable-suspended
chair, bar, gondola or similar vehicle designed or adapted to
carry less than 10 passengers.
NOTES:
Supplies not within item 1
1. Item 1 does not include the transport of passengers to,
from or within—
(i) a place of entertainment, recreation or amusement;
or
(ii) a place of cultural, scientific, historical or similar
interest,
by the person, or a person connected with that person, who
supplies a right of admission to, or a right to use facilities
at, such a place.
2. For the purposes of Note 1 any question as to whether a
person is connected with another shall be determined in
accordance with section 1122 of the Corporation Tax Act
2010.”.
Name
Name
Two of the Lords Commissioners of Her Majesty’s Treasury
Date
EXPLANATORY NOTE
(This note is not part of the
Order)
This Order inserts a new Group 12 into Schedule 7A to the Value
Added Tax Act 1994 (charge at reduced rate) to provide for a reduced
rate for the transport of passengers by means of certain
cable-suspended vehicles designed or adapted to carry less than 10
passengers provided that the transport is not supplied to, from or
within a specified place by a person (or a person connected with that
person) who supplies a right of admission to, or a right to use
facilities at, that place.
A Tax Information and Impact Note covering this instrument will be
published on the HMRC website at http://www.hmrc.gov.uk/thelibrary/tiins.htm.