High Court deals VAT blow to P&O.

VAT on goods sold on passenger ferries sailing outside territorial waters of European member states should be charged at the UK rate, according to a High Court ruling. The case is a further blow for the Peninsular & Oriental Steam Navigation Company – whose #220m cruise ship Aurora (above) broke down last month after only a day in service – which has been already hit by the end of duty free shopping. The operator runs a ferry service between Portsmouth and Bilbao. In the course of the voyage the ship sails through territorial waters of the UK, France and Spain and in international waters. Mr Justice Lightman ruled VAT should be levied at the UK rate because that is where passengers boarded the ship. While Customs contended that goods sold were within the scope of VAT, P&O said supply of goods on the high seas, and outside the territorial waters of any EC member state, fell outside was therefore not subject to VAT. – Chancellor Gordon Brown has decided to drag his heels in acting on a European Commission ruling that the UK must impose VAT on tolls on bridges until he is compelled to act by the European Court of Justice.