Is there VAT on train tickets, flights, taxis and hotels? The UK rules for business travel

Most of a business trip carries no VAT at all. Train tickets and flights are zero-rated, so there is nothing to reclaim on them. Taxis from VAT-registered operators and UK hotel rooms are charged at the standard rate of 20%, and whether a business can reclaim that VAT depends on who stayed or travelled and how the cost was paid. This page takes each line of a typical trip against HMRC’s own notices.

The VAT on each line of a business trip

The pattern is simple once it is laid out. Public passenger transport is zero-rated. The standard rate comes in with small vehicles and with accommodation. And the reclaim question is not about the rate at all — it is about who the cost was for.

Why there is no VAT on train tickets and flights

Passenger transport is not exempt, it is zero-rated, which is a different thing: the supply is taxable at 0%. HMRC lists what qualifies. The two that cover almost all business travel are transport “in any vehicle, ship or aircraft designed or adapted to carry not less than 10 passengers to the extent those services are supplied in the UK” and flights:

Journeys that cross the border are zero-rated too, as transport “from a place within to a place outside the UK or the other way around to the extent those services are supplied in the UK”. So a Eurostar ticket and a long-haul flight sit in the same place as a commuter train: 0%.

Air Passenger Duty is not a VAT line

On a zero-rated flight that means the duty is zero-rated too. The rates and bands are on Air Passenger Duty rates.

The exceptions that catch business travellers

A few transport services are standard-rated even though they move passengers. The one that shows up on expense claims is the shuttle between an airport car park and the terminal, when it is run by the car park operator or a connected person: standard-rated transport “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”.

Taxis, minicabs and app-booked private hire

So the seats decide it, not the brand of service. A minibus with 10 or more seats is zero-rated; a saloon car is standard-rated. Whether VAT is actually on the fare then depends on whether the business supplying the journey is VAT-registered: “The supply of private hire vehicle and taxi services has always been subject to VAT when supplied by a VAT registered business.”

What changed on 2 January 2026

Some operators that acted as principal had been using the Tour Operators’ Margin Scheme, paying VAT only on their margin after paying the driver rather than on the whole fare. Parliament closed that route. The Value Added Tax Act 1994 now says:

HMRC’s brief on the change is direct:

For a business buying journeys, the practical effect is on the fare, not on the reclaim: an operator acting as principal accounts for VAT “an operator who acts as principal must account for VAT on the full fare”. The brief also says what is not affected: “This change does not impact journeys where private hire vehicle operators or taxi operators act as a disclosed agent, or journeys provided directly by the driver to the passenger (for example a taxi hailed in the street).”

Hotels: the standard rate, the 28-day rule and the extras

Hotel accommodation is not on HMRC’s zero or reduced rate lists. A temporary reduced rate applied “From 15 July 2020 until 31 March 2022, a hotel, inn, boarding house, or similar establishment will benefit from a temporary reduced rate”, and that period has ended, so a UK hotel room now carries VAT at the standard rate of 20%.

Long stays

The hotel must then “treat at least 20% of the remainder as being for facilities”, so the bill does not fall by the whole room rate. And the rule is per person, not per booking: “The rule does not apply to bookings by companies where the accommodation is used by a succession of short-term occupants, and each stay is less than 29 days at a time.” A project team rotating through the same rooms a fortnight at a time does not get it.

Charges on the same invoice

• No-shows: “The customer cancels or fails to turn up and the customer’s credit card is charged with £100. The £100 is taxable.”
• Meeting rooms: “If you supply a room that is not for the purpose of a supply of catering such as for a conference, your supply is exempt, provided you have not opted to tax.”
• Service charges: “Any service charge you make is standard-rated.”

What the business can reclaim

The rate on the receipt is only half the question. VAT Notice 700 sets the reclaim rules for travel and subsistence, and they turn on how the cost was paid:

• Flat rate: if “you pay an employee a flat rate for subsistence expenses cannot claim as input tax any VAT incurred on those expenses”.
• Actual cost: if “the business pays the actual cost of the supplies can claim the input tax incurred”.
• Hotels: “When you or your employees are away from your normal place of work on a business trip, you can treat as input tax all the VAT incurred on hotel and similar accommodation.”
• Invoices in the employee’s name are accepted: “the invoice can be made out to an employee for subsistence expenses mentioned in section 12.1”.
• Small amounts: “you do not need a VAT invoice for some types of supply if your total expenditure for each taxable supply was £25 or less (including VAT).” The list includes “car-park charges (on-street parking meters are not subject to VAT)”.

That is why the choice between paying HMRC’s meal allowance rates and reimbursing receipts has a VAT consequence as well as an income tax one. The allowances are on travel expenses and tax.

Clients are different

Paying for a client’s hotel or dinner is business entertainment, and “You cannot recover input tax incurred on the provision of business entertainment expenses.” Entertainment explicitly includes the “provision of accommodation (such as in hotels)”. Employees’ own subsistence is outside those rules: “These are not covered by the business entertainment rules because they are not business entertainment.” There is one opening for overseas customers: “VAT incurred on the entertainment of overseas customers may be recoverable when incurred for the purpose of the business if it’s reasonable in scale and character.”

The travel supplier’s own invoice

When a travel supplier buys in transport or hotels and resells them as principal, the margin scheme applies: “If you buy in passenger transport and resell it as principal, you must use the Tour Operators Margin Scheme.” Under that scheme the invoice does not show VAT you can reclaim on the travel itself. How that changes the price comparison between suppliers is explained on what corporate travel management costs. Mileage and fuel, which follow different rules again, are on VAT on mileage claims.

This page reproduces HMRC’s published notices and the text of the Value Added Tax Act 1994 as read on 2026-09-25. Partial exemption and non-business activities can restrict any reclaim. It is not tax advice.

Common questions