Buying a boat from the EU and Brexit Transition date (re:VAT)

[TwoHooter]

So I think you would make your plan almost bulletproof by putting the boat in a port/marina and having documentary proof.

That is what I would have done, but I think Covid makes it impossible.

 

[jrudge]

Absolutely, yes it does. This is one of those occasions when there is an irrefutable cut-off time and date, it couldn't be clearer. The witching hour as I call it, 23:00 UTC on 31/12/20 is crucial. It is where the vessel is at that moment in time that counts. Nothing else.

I don't think this is correct.

The UK have returned goods relief and if the goods are outside the UK for more than the specified period they return needing tax paid.

Now whether anyone can prove the boat has been out of the UK etc is a different issue.

I would imagine the EU have very similar rules, that if the goods leave the EU for period X then they loose their community tax paid status. You could probably retain it by going back to the EU every now and then, but I doubt it is for the live of the asset whilst not in the EU

 

[TwoHooter]

Does one night in Paris on Dec 31 - so as to speak, mean your boat is forever tax paid in the EU?

Absolutely, yes it does. This is one of those occasions when there is an irrefutable cut-off time and date, it couldn't be clearer. The witching hour as I call it, 23:00 UTC on 31/12/20 is crucial. It is where the vessel is at that moment in time that counts. Nothing else

I don't think this is correct. The UK have returned goods relief and if the goods are outside the UK for more than the specified period they return needing tax paid. Now whether anyone can prove the boat has been out of the UK etc is a different issue. I would imagine the EU have very similar rules, that if the goods leave the EU for period X then they loose their community tax paid status. You could probably retain it by going back to the EU every now and then, but I doubt it is for the live of the asset whilst not in the EU

Is the disagreement about whether or not a boat that is in the EU at the witching hour can keep its status as Union Goods for ever, as set out in the above quotes? If so I'll stand my ground.
Consider a yacht which was bought new in France, had VAT paid when it was sold to its first owner, and has never left France. It is in France at the witching hour. Does it retain its Union Goods status? Yes it most certainly does.
Now consider a boat which was bought new in the UK pre. Brexit, had VAT paid on it, then went to France and has stayed there ever since. The boat is there at the witching hour. Does it retain its Union Goods status? Yes. That is why forumites with boats in Spain are busy organising letters from their marinas.
Now consider the first example again. The yacht leaves France and sails to the Caribbean. It's away for 2 years. It returns and applies for Returned Goods Relief (RGR) which is granted. The yacht is now Union Goods again and will be for life. The process can be repeated as many times as required.
Concerning similarity of rules, the evidence is that they will be identical, at least to begin with. The RYA says: 'The UK legislation which sets out the reliefs from import VAT and duty, has not yet been laid. However, advice received from HMRC and HM Treasury indicate that Returned Goods Relief (RGR) will be replicated in UK law. ' I read this as meaning that the EU RGR which has applied up to now will be exactly the same in UK law. The EU rules seem to me to be clear and I've already quoted them. As a check I looked at the Irish rules, and they do seem to confirm that the RYA page is right. Provided that it is the boat that is eligible for RGR in the EU and not the person (I think that is the case) then a successful claim for RGR means the boat regains its status as Union Goods (which it lost upon export) and has free movement within the EU without tax, and, crucially, without a time limit.
However if the boat then leaves the EU again it has to apply for RGR again when it returns.
And, finally, there is nothing to stop a boat which is outside the UK at the witching hour returning to the UK and claiming RGR provided it complies with the rules. It does not matter where that boat has been, it could have been in the EU, or the Caribbean, or anywhere.
I'm no more an expert on this than anyone else here, but everything I say is based on the best information I can find.

 

[jrudge]

Returned goods releif is only available to the original exporter of the goods. I can’t bring my boat back to the U.K. as I wasn’t the original exporter for example.

As I said in my reply if the goods keep returning to the eu within whatever timescale they have for returned goods the all week and good. But go beyond that then no. So are they running paid for life? No. Only if they remain in the eu or return each time within the time limit ( whatever time that is )

 

[DavidJ]

Just turning things on their head to try and understand.
Probably not too many examples but a boat bought in the EU (let’s say Spain and has paid IVA by the Spanish owner) and which has been in the UK for more than 3 years, would it be liable for VAT in the UK if the boat was continued to be kept here after Brexit?

 

[jrudge]

No

 

[Portofino]

The principle adopted , the way tax authorities look at theses issues is this .
They are not bothered about loop holes banded about or spurious interpretations by interested parties .RYA inc .
If it’s large weighs a ton , born grey has two big flappy ears and a trunk its an Elephant.

No amount of “ surgery “ amputating the trunk, dying the skin another colour eg painting zebra stripes etc changes the fact it’s an elephant.

So with that in mind what is your intend use ? Where have you kept the boat prior to 31 / 12/ 20 ?
Where is your main economic activity ? U.K. ?

Repositioning your boat on the 31/12/21 is as say attempting to change an elephant into something it’s is not .
They will successfully argue its evasion . It’s not a zebra .

Unless on its merits you are relocating , house , job , life , kids schools bank account s etc coincidentally on that date .

Thats why no one can be specific because if the tax peeps issued boundaries folks would work to those ,
Thats why this thread is all over the place looking for a bullseye. There is no target never was .

 

[TwoHooter]

Returned goods releif is only available to the original exporter of the goods. I can’t bring my boat back to the U.K. as I wasn’t the original exporter for example.

Agreed.

As I said in my reply if the goods keep returning to the eu within whatever timescale they have for returned goods the all week and good. But go beyond that then no. So are they running paid for life? No. Only if they remain in the eu or return each time within the time limit ( whatever time that is )

The relevant time limit is 3 years. If you export something from the EU then bring it back within 3 years you should get RGR, and no limit on the number of times you can do this (unless the rules change ).

For what little it's worth, I agree with jrudge's answer to DavidJ. But if the boat is in the UK at the witching hour and then one day goes back to Spain it must pay IVA a second time, based on the value at the date of importation.

 

[TwoHooter]

The principle adopted , the way tax authorities look at theses issues is this .They are not bothered about loop holes banded about or spurious interpretations by interested parties .RYA inc .

The RYA interpretations are not spurious. What on earth gives you the right to make such an accusation? And nobody on here is discussing loopholes so far as I can see. We have simply been discussing what the rules are and how best to comply with them.

If it’s large weighs a ton , born grey has two big flappy ears and a trunk its an Elephant. No amount of “ surgery “ amputating the trunk, dying the skin another colour eg painting zebra stripes etc changes the fact it’s an elephant. So with that in mind what is your intend use ?

Intended use is not referenced anywhere in the UK or the EU documentation relating to RGR. It's irrelevant. The VAT on a boat is the same whether the intended use is a boat or a brothel.

Where have you kept the boat prior to 31 / 12/ 20 ?

The boat can have been anywhere in the world prior to 31/12/2020. In the case of yachts many of them have. The only things that matter concerning location are where the VAT was originally paid (it must have been in a state that was a member of the EU at the time of payment), whether it has been out of the EU for more than 3 years, and where it is at the witching hour.

Where is your main economic activity ? U.K. ?

Irrelevant. Doesn't appear as a consideration in anything I have read.

Repositioning your boat on the 31/12/21 is as say attempting to change an elephant into something it’s is not . They will successfully argue its evasion . It’s not a zebra . Unless on its merits you are relocating , house , job , life , kids schools bank account s etc coincidentally on that date .

Utterly wrong. Positioning a boat at the witching hour is important and it is NOT tax evasion. It is simply an act to crystallise the customs status of the boat. If that is not the case then all the British owners of boats on which VAT was originally paid in the UK and which will be lying in Spain at the witching hour are wasting their time getting letters from marinas because they don't live in Spain, their kids are not in schools there, etc. And they are not wasting their time, they are doing the right thing. I quote: 'For customs purposes, the ownership of a vessel is not relevant.'

Thats why no one can be specific because if the tax peeps issued boundaries folks would work to those , Thats why this thread is all over the place looking for a bullseye. There is no target never was .

What you are suggesting here is that nobody can ever make any business decisions with reference to tax law. That's nonsense.

 

[Hurricane]

Any idea what the standard of proof is likely to be? Would you take a photo at, say, 22.59 on 31 December? Or a series of three taken at 22.59, 23.00 and 23.01?
I'm in the same situation as you, but down at Torrevieja, and all of this is new to the marina. As far as I can see, evidence of location would have to be that of a continuum through the transition from UK membership (ie prior to 23.00) and into the actual brexit (ie after 23.00). Or am I being paranoid?

I think you should concentrate on getting a letter from your marina - just stating the truth - nothing fishy or ilegal.
The letter should simply declare that your boat was in the marina at 23:00 on the 31st December 2020.
At SC, we have managed to get our marina manager to issue us with stamped certificates early in the new year.
One of our marina's existing procedures is for a dockmaster to go round every morning logging boats in the marina.
They have been doing this for as long as I can remember.
From these logs, our marina is able to make that declaration.
Our plan to photograph the boats is a "belt and braces" idea that we will run alongside the marina's certificate.

@DavidJ - Your wording earlier in this thread has helped us with ours - thanks.
EDIT sorry - different thread - it was this one:-
Example Spanish marina letter for Brexit year end
But thanks anyway

 

[Hurricane]

I guess I’m resigned to the fact that one day I’ll have to pay VAT (IVA) on my boat in Spain
I wonder how this will be enforced.
Will the Guardia Civil impound my boat one day when I’m not there?
Will they flag me down when I’m out for the day?
How would I preempt this and just “get it done”

As long as you keep your boat in EU waters, what makes you think that this will ever happen?

 

[DavidJ]

As long as you keep your boat in EU waters, what makes you think that this will ever happen?

I guess I’m concerned about the interpretation of
“no VAT becomes due as there is no VAT taxable event” re RYA

 

[Portofino]

The RYA interpretations are not spurious. What on earth gives you the right to make such an accusation? And nobody on here is discussing loopholes so far as I can see. We have simply been discussing what the rules are and how best to comply with them.

Intended use is not referenced anywhere in the UK or the EU documentation relating to RGR. It's irrelevant. The VAT on a boat is the same whether the intended use is a boat or a brothel.

The boat can have been anywhere in the world prior to 31/12/2020. In the case of yachts many of them have. The only things that matter concerning location are where the VAT was originally paid (it must have been in a state that was a member of the EU at the time of payment), whether it has been out of the EU for more than 3 years, and where it is at the witching hour.

Irrelevant. Doesn't appear as a consideration in anything I have read.

Utterly wrong. Positioning a boat at the witching hour is important and it is NOT tax evasion. It is simply an act to crystallise the customs status of the boat. If that is not the case then all the British owners of boats on which VAT was originally paid in the UK and which will be lying in Spain at the witching hour are wasting their time getting letters from marinas because they don't live in Spain, their kids are not in schools there, etc. And they are not wasting their time, they are doing the right thing. I quote: 'For customs purposes, the ownership of a vessel is not relevant.'

What you are suggesting here is that nobody can ever make any business decisions with reference to tax law. That's nonsense.

Sorry you seem upset about his .
My wife is ex HMRC tax auditor , she’s been out of it a while but still has friends and contacts in the job .
Perhaps my wording “intended use “ should read purpose.
They may challenge what use was it or purpose ( sorry my bad ) of risking a winter boat trip out of season for a very short timely documented visit to Ireland or where ever .

The sole purpose of the trip was ..................................? The answer is open to interpretation. Could it have been planned avoidance / evasion ??
A uncharacteristic change of behaviour.Why ? What purpose ?

This sits well with Hurricanes predicament as he is not doing anything different on the 31/11/21 than the previous 12 years or so .The dock master will do his morning rounds .
’ Its large it’s white , has pointy end , fly bridge , berthed in SCM, it’s been there X years etc “ = it’s a boat in EU waters .Any recent activity , behaviour does not change that .
If a picture or other documents ie marina cert eases his anxiety , fine thats another future issue .It’s does not change the fact his years of previous boat economic activity and future planned use age is based around SCM .You know berth lease etc .
Even if he spent the new year there ( may be his normal behaviour? ) and happened to go fishing , get a bit overexcited chasing tuna or what ever and his AIS showed him outside EU waters in the middle , and he returned eventually on a lads kinda trip say late New Year’s Day , so the dock master marked him absent on 31/12/20 , they would not create a VAT payable rouse.
Ask what was his intention? Ans he went fishing as usual .What did he have in mind etc ? Nothing sinister .

You are saying a preplanned out of character, out of season dash from the U.K. to the Eu specifically on this date then returning shortly is deliberately for the purpose of exactly what ?

Your point about tax laws , again open to interpretation on normal practice and acceptable behaviour .Google U.K. VAT / TAX court cases .Plenty of taker uppers who think they know better .Some win most lose .
Bit like the £100 parking fine guy blowing £30 K he‘s had his day(s) in court
Its more of a balanced score card , a basket of activity/ behaviour.Remember unusually from the revenue pov you are guilty until proven innocent.

Any how good luck and I hope you find a workable solution.


Nobodies gonna successfully win a challenge over Hurricanes boats VAT status .

 

[jrudge]

There is no avoidance of any uk tax. HMRC will take no interest.
The boat get a status based on where it lies.

 

[TwoHooter]

Hi Portofino, thanks for an interesting reply.

I note all that you say. I subscribe to a service called Accounting Web where I read lots of interesting VAT and tax law reports. I think I have a handle on how the FTT etc. deal with cases even though I'm by no means an expert.

Anyway, like everyone else, I think that once one has decided where to position one's boat at the witching hour a letter is definitely the best solution. It just goes into the folder with all the other papers that a boat accumulates during its life. Perhaps scan it and keep the electronic copy safe off the boat as a backup?

 

[Paulie300]

Is the disagreement about whether or not a boat that is in the EU at the witching hour can keep its status as Union Goods for ever, as set out in the above quotes? If so I'll stand my ground.
Consider a yacht which was bought new in France, had VAT paid when it was sold to its first owner, and has never left France. It is in France at the witching hour. Does it retain its Union Goods status? Yes it most certainly does.
Now consider a boat which was bought new in the UK pre. Brexit, had VAT paid on it, then went to France and has stayed there ever since. The boat is there at the witching hour. Does it retain its Union Goods status? Yes. That is why forumites with boats in Spain are busy organising letters from their marinas.
Now consider the first example again. The yacht leaves France and sails to the Caribbean. It's away for 2 years. It returns and applies for Returned Goods Relief (RGR) which is granted. The yacht is now Union Goods again and will be for life. The process can be repeated as many times as required.
Concerning similarity of rules, the evidence is that they will be identical, at least to begin with. The RYA says: 'The UK legislation which sets out the reliefs from import VAT and duty, has not yet been laid. However, advice received from HMRC and HM Treasury indicate that Returned Goods Relief (RGR) will be replicated in UK law. ' I read this as meaning that the EU RGR which has applied up to now will be exactly the same in UK law. The EU rules seem to me to be clear and I've already quoted them. As a check I looked at the Irish rules, and they do seem to confirm that the RYA page is right. Provided that it is the boat that is eligible for RGR in the EU and not the person (I think that is the case) then a successful claim for RGR means the boat regains its status as Union Goods (which it lost upon export) and has free movement within the EU without tax, and, crucially, without a time limit.
However if the boat then leaves the EU again it has to apply for RGR again when it returns.
And, finally, there is nothing to stop a boat which is outside the UK at the witching hour returning to the UK and claiming RGR provided it complies with the rules. It does not matter where that boat has been, it could have been in the EU, or the Caribbean, or anywhere.
I'm no more an expert on this than anyone else here, but everything I say is based on the best information I can find.

Thank you for this summary Two Hooter, this aids me and alleviates worry for my intended purchase; a vat paid UK reg boat, probably from Spain or Med somewhere, currently (ie relevant end of 2020) lying in say Spain, for continued use in same areas, whereby (with the correct evidence of vat paid status) i have no issues. For belt and braces, I will follow Hurricanes suggestion of gaining an attestation from the home marina of its whereabouts at the relevant hour. In fact though, to my reading of this and a broad analysis of the opinions and info offered, if I take it back to UK, it is also no issue, it is a vat paid boat. Moving on slightly, I have two other boats, one bought UK in 2020 vat paid, the other France bought 2018 (never again - a hassle getting it off of the Fr register and I hadnt realised at the time that the French charge an annual tax for the luxury of an inboard engine...) and so for the former of these, which I will take back to France where I have a berth at Port Olona in spring, I think no issue, but I must ensure I keep satisfactory evidence of having paid the vat. For the latter 2018 boat, I also assume ok, but need to ensure I dig out the evidence that the vat was paid in France at purchase because that boat will either stay in UK, as my occasional cold weather boat, or may be px'd against my new purchase...
Whilst my view is that we all tend to read complication in where it may not be warranted, I will add a concern which has arisen for aircraft, and I believe will apply to boats equally.... Where some years ago the HMRC ceased providing the standard letter confirming ."...Vat paid for Free Circulation within the EU..." or words to that effect, it became an issue with proving that whilst the vat may have been paid, it is hard to prove "on the spot" that one did not subsequently (rightly or wrongly) reclaim the same vat, thus your plane (or boat) is no longer "vat paid" at all but will be subject to vat in the area in which it is based or first triggers a vat event, ie it turns up from elsewhere... the old HMRC letters were superb, beyond challenge, but a vat-paid invoice doesnt quite have the same Blue Chip feel about it in the Douanes hands save my Franglais sufficiently bamboozles... food for thought? Is there a similar HMRC Vat paid type doc for boats, or are we all using the original vat invoice stamped as paid... ?

 

[TwoHooter]

Paullie300 - Sorry, I don't think I can add anything to what I have already said. If you go through this thread and the several others on the various YBW forums I think you will find the information you need.

I found the forum immensely helpful when I was having to make decisions about our own boat and was able to bounce ideas off other people - we had a really lively and useful discussion, thanks everyone.

 

[Portofino]

In the EU states that have compulsory registration, like IT , Fr , Esp they seem to accept the reg documents / book .
This is because if it’s privately owned and has decals plastered on or ghost marks then they know it has been VAT paid .
Assuming its still in Eu waters .The original private owner paid the vat .

 

[Hurricane]

Thank you for this summary Two Hooter, this aids me and alleviates worry for my intended purchase; a vat paid UK reg boat, probably from Spain or Med somewhere, currently (ie relevant end of 2020) lying in say Spain, for continued use in same areas, whereby (with the correct evidence of vat paid status) i have no issues. For belt and braces, I will follow Hurricanes suggestion of gaining an attestation from the home marina of its whereabouts at the relevant hour. In fact though, to my reading of this and a broad analysis of the opinions and info offered, if I take it back to UK, it is also no issue, it is a vat paid boat. Moving on slightly, I have two other boats, one bought UK in 2020 vat paid, the other France bought 2018 (never again - a hassle getting it off of the Fr register and I hadnt realised at the time that the French charge an annual tax for the luxury of an inboard engine...) and so for the former of these, which I will take back to France where I have a berth at Port Olona in spring, I think no issue, but I must ensure I keep satisfactory evidence of having paid the vat. For the latter 2018 boat, I also assume ok, but need to ensure I dig out the evidence that the vat was paid in France at purchase because that boat will either stay in UK, as my occasional cold weather boat, or may be px'd against my new purchase...
Whilst my view is that we all tend to read complication in where it may not be warranted, I will add a concern which has arisen for aircraft, and I believe will apply to boats equally.... Where some years ago the HMRC ceased providing the standard letter confirming ."...Vat paid for Free Circulation within the EU..." or words to that effect, it became an issue with proving that whilst the vat may have been paid, it is hard to prove "on the spot" that one did not subsequently (rightly or wrongly) reclaim the same vat, thus your plane (or boat) is no longer "vat paid" at all but will be subject to vat in the area in which it is based or first triggers a vat event, ie it turns up from elsewhere... the old HMRC letters were superb, beyond challenge, but a vat-paid invoice doesnt quite have the same Blue Chip feel about it in the Douanes hands save my Franglais sufficiently bamboozles... food for thought? Is there a similar HMRC Vat paid type doc for boats, or are we all using the original vat invoice stamped as paid... ?

Firstly, I an really NO expert.
But your last question first.
AFAIK, there is no HMRC paperwork for proof of VAT paid.
The only proof is the first invoice where ownership passes to a non-VAT registered owner (private owner for example).
This will be in the form of a VAT invoice from a registered VAT company which will have to account for the VAT transaction it its VAT returns.
And I don't think that a paid stamp is necessary.

But, if I understand you correctly, I think you have got it wrong with your two boats.
As of the 1st Jan 2021, you may have VAT problems moving a VAT paid boat from the UK to the EU.
From the EU to the UK there are also restrictions but you may be able to clain RGR (Return Goods Relief) over the next year.
As I understand it, RGR will only be available to boats that were "exported" from the UK to the EU within the last 3 years.
Other than that, if you move a boat between the UK and EU, you will probably be exposing yourself to paying the VAT again.

I may have missunderstood your post though

 

[Paulie300]

Thanks Hurricane, I note this caution; it does read through the thread that there is disagreement/varying interpretations of the new situation, no doubt the issues will become clear but im right at the point where clarity sooner than later will help so I will continue looking into it.
To my point, which you address on vat invoices as proof of vat paid status, the issues have historically arisen where someone didn't have, or lost the HMRC cert, because if the original owner operated (or appeared to operate) themselves commercially (or the owning entity did so) in order to qualify for reclamation of the vat, then whilst the seller will have paid the vat to HMRC, the buyer, having paid the vat invoice in full, could legitimately reclaim the vat paid via a standard vat return. If this reclamation is 'overlooked' or forgotten when later sold (or even a few sales down the line) and it is sold along the way at an 'all in' vat paid type price, then in reality the new owner is liable for the actually unpaid vat, and this is where in my experience the French, awash with Dounes, spot it and seek a pay day. They are of course right, someone should have stumped up and not reclaimed vat, but it doesn't help an unwitting new owner who simply thought from the original invoice that the vat had been paid at some point and NOT recalimed. The point here is that it is hard to evidence a negative, ie that a vat reclamation had not taken place and that the asset is truly a vat paid item. Do you follow the quandary, it arises frequently with aircraft, particularly on non UK reg where schemes abound and the French put the onus on the owner to prove vat was paid (and not reclaimed) somewhere.... As we all know, anyone may qualify for vat registration much like a business, and so it isnt plain to spot what has or hasn't happened in the payment and potential reclamation of vat. I have no experience of doing it, but have been told that I'm being naiive when the hurdle to reclaim vat as a 'business' when owning a boat is simply one 'commercial' charter entered in the log... ?