In rural transport, we often find scenic areas with small populations whose transport movements are dwarfed by the numbers of tourists arriving by many orders of magnitude. Where a very high proportion of tourists arrive by car (as often happens in rural areas), this creates congestion and parking problems, as well as generating a large carbon footprint.

One of the strategies to move people onto public transport and reduce car travel is to wrap transport into the ‘visitor experience’. Ideally this would encourage people to book public transport at the same time as their visitor attraction tickets. Even better, discounts could be applied to the combined tickets to encourage people to choose them. General marketing wisdom is that reducing cost and increasing convenience can shift behaviour.

There’s a snag to this in the UK though - the tax regime penalises exactly this kind of strategy.

Public transport tickets are zero rated for VAT in the UK, with a few exceptions. Unfortunately, combining transport with venue admission is one of these exceptions. The key paragraph on VAT from HMRC is:

You cannot zero rate the transport of passengers:

to, from or within a place of entertainment, recreation or amusement or a place of cultural, scientific, historical or similar interest, if you’re also the person supplying the right of admission to that place — see section 8

The impact of this is that, if a rural attraction - a bird sanctuary, stately home, adventure centre - offers bus or rail tickets at the same time as accepting admission bookings it must add 20% premium to the transport element.

This means if the attraction offered a combined ticket for a £10 entry plus a £10 rail ticket they would either have to:

Charge £22 as HMRC would seek to recover £2 to remain cost neutral or
Charge £20 and but remit £2 of that to HMRC and accept that they have effectively reduced their income from the combined deal by £2.

Obviously if the vendor choses to subsidise the costs then this reduction would further reduce their income.

Just to be absolutely clear, even if admission is free to venue, the transport if not if the two are wrapped together. The relevant excerpt from HMRC is:

8.1 When to charge VAT at the standard rate

If you supply any of the following transport services, you must charge VAT at the standard rate:

where the supply of transport services includes the right of admission to fair-grounds, museums, stately homes, theme parks, safari parks, water parks, piers, zoos and other places of entertainment, historic or cultural interest (transport services are standard rated whether you charge an overall admission price, which includes transport, or make a separate charge for the transport)
the right to use any vehicle to, from or within the places in the first bullet, where the transport and admission are supplied by the same or by connected persons — this includes rides such as those on monorails, cable cars and boats
transport in any motor vehicle between a car park or its vicinity and an airport passenger terminal or its vicinity, when the car parking facilities are supplied by you, or by a connected person — see paragraph 8.3
flights held out as being for entertainment or the experience of flying and not primarily to transport people from one place to another — see paragraph 8.4

8.2 How to treat supplies of transport services to a place where the public have free access

A supply of transport services to places where the public enjoy totally free access is normally zero-rated, for example:

national parks
seaside resorts
historic towns and villages
geographical areas such as the Norfolk broads
canals and lakes

But zero rating does not apply when the supply of transport services to these places also includes the right of admission to the places mentioned in the first bullet of paragraph 8.1.

Having tried to work this out for schemes we’ve been involved in, I have found this really complicated. The 20% can be quite significant and a worry even in small schemes. Possibly even more so in small schemes where suppliers are under pressure. The net effect is that it’s much harder to be creative when there’s an extra factor that wouldn’t be there if we weren’t trying to shift people’s travel behaviour. I would argue that the HMRC rules around VAT and public transport currently makes it harder to use marketing practices - pricing and convenience - to lower carbon transport to venues and attractions.