Since 1994 it has been possible to maintain, modify and convert some barges with the benefit of zero rating of VAT on services and some materials in the UK. This is largely a result of court cases pursued by two DBA members (see Legal History, below).

Note that this applies IN THE UK ONLY.  You cannot  buy goods or services in other countries with zero-rating.   You can buy goods (and possibly services) from another country, provided they are bought from a UK supplier. You do not have to be British, only the supplier.

What is zero-rating?

Zero-rating means that VAT is paid, but at 0%. It is not the same as being 'VAT-exempt', although in both cases you pay nothing. Using the wrong term when talking to a supplier will not help!

Who qualifies for zero-rating?

'A “qualifying ship” is any ship of a gross tonnage of not less than 15 tons which is neither designed nor adapted for use for recreation or pleasure.' *

Previous cases have established that residential use is not ‘recreation or pleasure’.

'The supply, repair or maintenance of a qualifying ship or the modification or conversion of any such ship provided that when so modified or converted it will remain a qualifying ship.' *

This applies to ANYONE buying goods or services to which UK VAT is applicable, not just to UK subjects. You can order equipment from a UK company for delivery to another country. It doesn't matter whether you are English, Dutch, German or Australian. Of course the delivery charge may be greater than the saving!

What goods and services can be zero-rated?

HMRC Notice 744C describes the zero-rating rules for qualifying ships (and aircraft). Sections 7.4 and 7.5 clearly specify what services and purchases can be zero-rated.

Normally you cannot reclaim VAT paid already unless the owner is registered for VAT except that HMRC have accepted in 38/09 that recently built residential barges can reclaim the tax paid from their builder.

How to Benefit from Zero-rating.

You are simply required to give your supplier an statement ('undertaking')that you are entitled to zero-rating for the service or goods. There is a sample undertaking in the DBA Library, accompanied by an extract from 744C that may help to reassure a supplier unused to zero-rating.

Suppliers are not obliged to accept the undertaking and some will not. If you don't like it, take your custom elsewhere.  Some suppliers have been persuaded to accept the undertaking by a letter from (E.g.) a surveyor confirming that you have a qualifying ship (QS).

The supplier uses your undertaking to justify his zero-rating to a VAT inspector; if the inspector disagrees, he will attempt to recover the unpaid VAT from you. If you cannot be found, the supplier will be liable.

Buying a ship outside the UK

If you intend to purchase your ship abroad you should read HMRC Notice 728 (New means of transport). This allows VAT to be charged in the 'State of destination' rather than the country in which it is purchased


Houseboats – defined as ‘designed or adapted for use solely as a place of permanent habitation and which does not have the means of, and which is not capable of being readily adapted for, self propulsion’. Take out the engine and convert the engine room to a study or workshop and you should qualify! BUT HMRC go on to claim ‘It is unlikely that a vessel such as a barge or a yacht would be regarded as a houseboat for the purposes of VAT because they are likely to lend themselves to being readily adapted’. If you want to know more, consult HMRC Notice 701/20 (Caravans and houseboats).

* The Law

The VAT Act of 1994 Schedule 8 (Zero Rate), Group 8 (Transport) contains the Law and the appropriate extracts are above.

The simple explanation of which services and equipment qualify is given in HMRC Notice 744C (Ships, aircraft and associated services)

VAT notice 701/7 and 701/20 give advice on how to obtain a VAT exemption for vessels built with facilities for the disabled.

Legal History

Zero-rating of 'our' boats is largely due to a landmark court case by DBA members.

DBA members Colin and Ali Stone's successful Tribunal and High Court case confirms that Dutch barges and similar vessels that are designed and supplied for use as the permanent residence of the customer are qualifying ships and eligible for zero-rating if they meet the tonnage requirement (see below). HMRC issued Brief 38/09 to clarify this.

The Tribunal ruled that ‘It stretches the ordinary meanings of the words recreation or pleasure well beyond their natural meaning to say that this encompasses a home or place of permanent habitation’. This allowed conversion or building of barges (of over 15 gross tons) for residential use to be zero-rated.

Gross Tonnage

This is the clause that initially raised the issue to the notice of HMRC as narrow boat builders were claiming their craft were of 15 tons. Gross tonnage is a measure of capacity not weight. The volume is the internal volume of the hull up to the uppermost continuous deck – an indication of carrying capacity. This measurement is immured in mercantile marine history. Narrow boats were claiming that the roof was the measurable deck but to keep in line with history the side deck should be used as the measured deck.

For steel barges the calculation is Length x Beam x Depth x k = gross tonnage. 

L = Length overall in metres but not including appendages not contributing to the volume of the vessel e.g. bowsprit or stern hung rudder.
B = Breadth in metres at widest point but not including rubbing strake or lee-boards.
D = Depth in metres from the underside of the deck on the middle line or at the side of the vessel to the top of the plating at the side of the keelson.
k = 0.16 for vessels up to 24m and 0.235 for vessels 24m or greater.

As a worked example Neeltje is 21.29m x 4.11m x 1.72m x 0.16 = 24.1 gross tons.

I am happy to attempt to answer any questions by e-mail!

Andy Soper

© DBA  Andy Soper September 2009. Updated 2014.