asked Her Majesty's Government:

What value added tax is applied to (a) prime and (b) multiple contractors concerned with shipping construction. [HL2949]

The construction and supply of a “qualifying ship” (one whose gross tonnage is not less than 15 tonnes and which is neither designed nor adapted for use for recreation or pleasure) is VAT zero-rated. Parts and equipment supplied in the course of construction of a qualifying ship are also VAT zero-rated. However, parts and equipment supplied to a government department or any part of the Scottish Administration are generally VAT standard-rated. This treatment applies to both prime contractors and other contractors involved in construction and supply.

asked Her Majesty's Government:

Whether value added tax considerations as between prime and multiple contractors were taken into account when budgeting for the building of two new aircraft carriers; and [HL2950]

What will be the effect on the naval budget programme of the value added tax on the new joint venture between BAE and the VT Group. [HL2951]

Shipbuilding is zero-rated for value added tax provided it meets certain criteria and this was taken into account in setting the budget for the future aircraft carriers, for which the contract as a whole will be zero-rated. This zero-rating is expected to apply to naval shipbuilding work undertaken by the joint venture to be formed by BAES and VT Group and there will, therefore, be no impact on the naval programme.