Update: a message from TfL tells me that the cable cars are rated for 10 people so the tax change doesn’t actually affect them.
Must admit, having sat in one, I can only presume that’s 10 thin people, but that’s the rating, so no tax on cable car tickets.
Tax is never a simple affair and the application of VAT on transport services is surprisingly complex.
It probably wont surprise you to learn that public transport services are zero-rated for VAT purposes, which makes sense, as it is a public service and would seem a bit odd to tax something that was part funded by taxes in the first place.
Anyway, can you imagine the fuss if tube and bus fares all jumped by 20% overnight?
Curiously though, the zero-rating of tax it turns out, only applies if your mode of transport has at least 10 seats for passengers and staff. Fewer than 10 seats, and you pay VAT at 20% on the tickets sold. Not sure why 10 seats is the deciding factor, but there you go, it is.
What about the Cable Car?
Although as a transport service, its peak can carry 2,500 people per hour, it carries fewer than 10 people per pod, and that is what counts. So tickets should have 20% VAT added to the price. In theory.
However, I was notified on Twitter yesterday that the Cable Car is to be treated differently for tax purposes.
Section 2.189 of the Budget red book says:
“The Government will introduce a 5 per cent reduced rate of VAT for passenger transportation in cable-based transport systems carrying fewer than ten people.”
So, VAT at 5% instead of 20%.
Frankly, how you react to this is probably more down to political bias and opinion about the Cable Car.
- If you think the Cable Car is a tourist folly and waste of money by the Mayor, then this is an OUTRAGEOUS TAXPAYER SUBSIDY TO POP UP BORIS’S UNNECESSARY CORPORATE JUNKET!!!
- If you think the Cable Car is a form of public transport linking two sides of the river, then this is an OUTRAGEOUS IMPOSITION OF A 5% TAX ON A PUBLIC TRANSPORT UTILITY!!!
I leave it to your political bias to decide which side of the fence you sit.
I’m going to sit on the fence until TfL have done some breakdown on usage figures!
This is an interesting move for the tourist cable cars outside London anyway who will, I’m sure, be celebrating on this one.
This is a massive shot in the arm of most of the Scottish Ski Industry – it brings policy in line with Europe and will put £3.66 extra in the pockets of operators per adult ticket sold. That sort of cash makes a real difference to being able to make it through bare years like this and the amount of capital investment that can be made in good seasons. (09/10 and 10/11)
What has happened to this? Did the London cable car succeed in avoiding 20% VAT? If so when will this be applied to Scottish resorts? I’d hate to think it was a short term one sided political issue to aid the London Olympic scheme. If that were the case the government is running a tax avoidance scheme that should be repaid.