»Ê¹ÚÌåÓýapp

Group 8, item 1 excludes from zero-rating any ship which, although 15 tons or over, is designed or adapted for use for recreation or pleasure. »Ê¹ÚÌåÓýapprefore, private pleasure boats or yachts are not zero-rated under item 1 even if supplied for business use (for example, sail training).

However, cruise ships are zero-rated provided they are:

• 15 tons or over; and
• unsuitable for private use; and
• are supplied for use in the business of providing recreational or pleasure cruises for fare-paying passengers.

In A. & P. Appledore (LON/90/972Y), a derelict tug was converted into a luxury pleasure boat to be used for entertaining in connection with the Americas Cup race. »Ê¹ÚÌåÓýapp Appellant relied on Article 15.5 of the Sixth Directive (now Article 148 of Directive 2006/112), which included the concept of modification under the exemption provisions, since UK law at this time (item 1 of Group 10 to Schedule 5 of the VAT Act 1983) did not zero-rate modification of ships. He claimed that after the modification the boat was not a ship designed for recreation or pleasure or alternatively it was to be used for commercial activities and should qualify for relief. »Ê¹ÚÌåÓýapp Tribunal found that the purposes for which the converted barge were to be used, entertaining sponsors and the media on board and providing them with a good view of the race, did amount to purposes of recreation or pleasure, and the appeal was dismissed.

Yachts are further considered in VTRANS110520, and residential boats in VTRANS110530.