A sad VAT story

[extravert]

Now that I am selling my old boat, I find that the evidence I thought I had that the boat was VAT paid is not worth the paper it is written on. When I bought the boat from a brokers 5 years ago, I was given a signed witnessed letter from him that VAT had been paid. In my ignorance at the time, I thought that a broker would know, and this was good enough. Now I find from HMCE that it means nothing. The broker is now out of business, so I have no comeback.

So I am having to sell my boat as VAT unpaid, and reduce the price by 20% (it is going to Sweden where VAT is 25%). I have tried to pay VAT in this country at our lower rate of 17.5%, but no one at HMCE (including the Personal Transport Unit in Dover) wants to know... 'We only deal with vehicles imported into or out of the EU, not vehicles already here'.

I have tried everything I can. It's now time to cut my losses and take the hit.

This story should be a warning to anyone here considering buying a used boat. I have the official view of HMCE on what constitutes VAT paid evidence in the EU. This information comes from their leaflet 'UK Guides for Yachts'. I'll try and summarise it here...

Registration documents (even part 1) mean nothing.

Letters from brokers and previous owners mean nothing.

For a boat first in use in the EU after 1/1/1985, either one of these 2 documents is required...
- A receipt from EU customs when the boat was imported into the EU of VAT paid
- The original purchase invoice when the boat was bought in the EU showing
VAT paid and the VAT registration number. Copies are not acceptable.

For boats in use in the EU before 1/1/1985, both these documents are required...
- Evidence of the boat age (survey, part 1 registration, insurance certificate,
builder's certificate)
- Evidence that the boat was in the EU on this single date : 31/12/1992 (mooring
receipt, harbour dues, dry dock record).

So for any boat first in the EU after 1/1/1985 where the original documents are lost (like mine), or for an older boat that cannot meet the two requirements, there will be a VAT problem.

I suspect there are many in the same position as I was, blissfully unaware of the serious situation that they are in.


<hr width=100% size=1>Adventures of the VAT unpaid <A target="_blank" HREF=http://www.xrayted.fsnet.co.uk>Teddy Bear Boat</A>

 

[TheBoatman]

I know all seems lost so what about trying the following.

1. Go back to manufacturer and ask them to check records.
2. Did manufacturer have UK agent to whom they supplied the boat in first instance. Is he still operating?

The fact that you only got a letter from (ex) broker should mean that you could try following boats trail from manufacturer and hopefully dig up the correct paperwork
Best of luck, I know its a longshot and being VAT registered myself I know that the VATMAN will not try to help you because he's getting 2 lots of VAT and he knows it?

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[extravert]

I've been down this trail already. The original British purchaser bought the boat directly from the manufacturer (X-Yachts), no dealer was involved. X-Yachts faxed me a copy of the original purchase invoice from 1986 within 5 minutes of giving them a call, pretty good record keeping on their part, but it didn't help. It showed that the boat was originally bought ex-VAT. Sometime the boat was brought into Britain, and if VAT was ever paid, there is no record now. The broker I bought the boat from probably knew this doubtful status, but sold it to me as VAT paid anyway.

I have been back through the ownership trail to all previous owners apart from the first. All previous owners were under the impression that VAT had been paid, but none had concrete evidence. The original owner is reputedly now in Singapore and the trail has gone cold.



<hr width=100% size=1>Adventures of the VAT unpaid <A target="_blank" HREF=http://www.xrayted.fsnet.co.uk>Teddy Bear Boat</A>

 

[jimi]

Why do'nt you sell the boat to your wife at a low price and charge VAT on that, a lower rate on a lower price. She can then sell it to the other guy as VAT paid. Why does'nt that work?

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[sailbadthesinner]

very sorry to hear this
shame to spoil the end of what has obviously been enjoyable ownership

<hr width=100% size=1><font color=red>I can't walk on water, but I do run on Guinness</font color=red>

 

[AndrewB]

Very sorry to hear of your predicament, Extravert. But it does sound like there is a very real chance that VAT never was paid. Regardless of whether the broker is still in business you still might have a comeback against him if you can track him down. I would have thought legal advice might be called for.

It does seem that Customs have simply washed their hands of VAT for yachts already in the country. Maybe they don't appreciate how unhelpful this can be for buyers and sellers, and indeed those who want to take their yacht abroad. I'm sure you are right there are more people who will find they are affected.


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[smee]

Is it not possible to walk into your local customs office (if you live near a port or the one nearest your boats mooring) and say I have this boat, this is what I paid for it (show Bill of Sale or receipt) and say I'm here to pay the VAT.

That is pretty much all I did. My boat was in Guernsey, VAT unpaid, so I brought it to the mainland and walked into Customs and paid it. They gave me a VAT receipt, end of problem.

Admittedly I had only just brought it in, however the Customs official I spoke to was unconcerned, about the where's and when's or even that I wanted to pay and pretty much questioned that I wanted to. Perhaps as I had gone in with the Bill of Sale and a Bankers Draft for 17.5% swayed the case! I went in the week before to check whom to make the bankers draft payable, so just took it in. In the face of 17.5% VAT being presented, it seems to me they are unlikely to go "OH no we can't take that!" and if you tried it you might save the loss you are having to incur with it unpaid!

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[Sarum28]

Our boat was built in 1979 and we don't have proof of VAT paid, should we be worried?

<hr width=100% size=1>Jonathan & Avril

 

[Neal]

A couple of suggestions..

1) Don't give up on the Broker just'cos he's no longer in business. Track him down. Was he a YBDSA Member? Do you know if he had indemnity insurance?

2) You should be able to pay the VAT in the UK. If HMCE are unhelpful (and, boy, don't I just know it!), it might be worth talking to a freight agent - plenty in yellow pages.

Best of luck.

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[Neal]

The Bill of Sale price...

is only the starting point in deciding value for VAT purposes. Make it too low, and they'll smell a bilge rat and insist on a market valuation.

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[Neal]

Depends.....

Can you prove: 1) that she was in EU at midnight on 31/12/1992
AND 2) that she was built before 1st January 1985?

If you can - don't worry.

If you can't - worry if you're the worrying type. Better idea though - try to get the above proof!

Good luck.



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[AndrewB]

It does seem from recent accounts that UK Customs really aren't interested in the case of existing yachts, and my experience with Customs in other EU countries is that the same applies if you have clear evidence the yacht was built before 1985.

So from Customs point of view it sounds OK in practice. The problem comes though when you come to sell and the buyer insists on evidence that VAT has been paid. And there you are dependent on what he is prepared to accept. If he insists on the letter of HMCE's current guidance and you don't have a mooring record for 31.12.92, you could, like Extravert, have problems.

Incidentally, although VAT was payable in the UK in 1979, proof that it had been paid on your yacht would not necessarily be sufficient on its own. As I understand it, a yacht can lose its VAT-paid status if it is sold outside the EU. So you would also have evidence, such as a complete record of bills of sale, that that had never happened.

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[Observer]

The point to bear in mind is it's not you who needs to prove the VAT status - it's your buyer. Where you get involved is having to show your buyer the boat's VAT paid because, if you can't, he wants a price reduction. So, if you can satisfy him it's "VAT paid" or "deemed VAT paid" you've solved his problem and the price cut disappers.

Now, the C&E publication you referred to - "UK Guide for Yachts" - states that the relevant dates for Sweden are "in use before 1/1/87" and "moored in EC on 31/12/94". If you can prove the above, then your Swedish buyer can import to Sweded under the transitional arrangements. As you have a 1986 invoice, the first bit seems OK. If you can also prove it was in the EC on 31/12/94, you're there.

(Usual fee applies)

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[petery]

Print one yourself...

I own a 1979 part 1 registered boat with no VAT receipts. The only way I can get a mooring receipt for that key date is to print one myself.

OK so I'm not selling it and not trying to avoid paying VAT - but I still worry what would happen if French customs looked for proof re VAT.

.. and based on other recent posts, once I've printed it I will cover it with official looking rubber stamp impressions

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[warrior40]

Just a thought, but why don't you withdraw from the sale and sell the boat to someone who is going to keep the boat in the UK and who wouldn't necessarily be asking for VAT receipts. I have never had a VAT receipt for any of my boats, indeed, I recently shipped my boat back to UK, and customs were happy with bill of sale etc, I was worried at first because I didn't have a receipt but bought the boat assuming VAT had been paid. I think most people just buy their boats assuming this, like you did. So why should another buyer who is going to keep the boat here not assume the same?? I know boats are not easy things to sell , but it may be worth hanging on to find a new buyer ??

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[WayneS]

You have just raised a good point.

I bought a boat in Denmark a couple of years back and am now struggeling to get the paperwork in order to prove VAT status.

However, I have the boat brought over on a truck. If there really was an issue, why did HMCE not do anything when it arrived in Dover..

mmm


Wayne

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[andy_wilson]

If the broker sold it VAT paid, then it is VAT paid. It is up to HMCE to get the VAT the broker collected from you (less his input VAT if applicable) off the broker. It only ceases to be VAT paid if VAT was shown on the Bill of Sale as a separate item, and you then claimed the VAT back on purchase because you were a VAT registered trader using it for commercial puposes.

If the Bill of Sale shows no VAT then this is a standard VAT inclusive transaction and the vessel is VAT paid.

Now prove it to the turnip!

PS Have followed the story of X-Ray Ted and indeed we are following in it's wake. Recon we will take about 5 years though!

Good Luck.

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[Observer]

Andy,

I'm afraid your advice is wrong in almost every respect.

1. >>If the broker sold it VAT paid, then it is VAT paid. It is up to HMCE
to get the VAT the broker collected from you (less his input VAT if
applicable) off the broker>>

What the broker said or didn't say is irrelevant to whether the boat is "VAT
paid" or not. The broker is the agent of the seller and is not making a
supply (to the buyer) on his own account. If a broker wrongfully represents that a boat is "VAT paid" when it isn't, the purchaser MAY have a valid claim against the
broker, but that would be a quite separate matter from the VAT status.

2. >>It only ceases to be VAT paid if VAT was shown on the Bill of Sale as
a separate item, and you then claimed the VAT back on purchase because you
were a VAT registered trader using it for commercial puposes.>>

A Bill of Sale, whether VAT is mentioned on the face of it or not (usually
not), has no bearing on the VAT status. That is a matter of fact, not
determined or influenced by what appears or doesn't appear on the Bill of
Sale. Further, it is immaterial whether VAT was recovered by the first
purchaser or not. If VAT was charged (VAT invoice issued) by the first
seller (manuafacturer or dealer) then the boat is "VAT paid". It makes no
difference whether the first buyer recovered the VAT or not and, once a boat
is VAT paid, it cannot cease to be "VAT paid" (unless it leaves the EU and subsequently returns under different ownership).

3. >>If the Bill of Sale shows no VAT then this is a standard VAT inclusive
transaction and the vessel is VAT paid.>>

A Bill of Sale is (in legal terms) a conveyance which transfers property in
the boat from the seller to the buyer. It has no bearing on the VAT status.
Where a Bill of Sale identifies both seller and buyer as resident in the UK,
C&E suggest this can be used as evidence to indicate that tax status is a matter for UK Customs (this appears in the "VAT Guide for UK Yachts" mentioned above). For VAT purposes, the place of supply is where the goods are at the time of sale, which could easily be outside the UK even if both seller and buyer are in the UK. Therefore, I find this advice somewhat questionable and would be reluctant to rely on it [following text added later] unless I could produce evidence that the boat was in the UK on the date of the Bill of Sale.



<hr width=100% size=1><P ID="edit"><FONT SIZE=-1>Edited by Observer on 01/05/2003 22:32 (server time).</FONT></P>

 

[extravert]

Re: Print one yourself...

There is no evidence that VAT has ever been paid for a boat on which it should have been. To claim that VAT was paid by forging a document sounds like fraud to me, and that could lead to a criminal record, jail sentence, loss of job, loss of new boat...

<hr width=100% size=1>Adventures of the VAT unpaid <A target="_blank" HREF=http://www.xrayted.fsnet.co.uk>Teddy Bear Boat</A>

 

[extravert]

Talking to a boat delivery company, HMCE generally do not inspect paperwork for boats brought into the UK from another EU country, and did not when my new boat came in from Sweden. However, sometimes they do, and because of this buyers quite rightly want proof that VAT has been paid.

As far as the VAT law for boats goes, it is not just when a boat crosses a EU border that you must have proof of VAT status. Theoretically you should carry with a boat at all times proof of VAT status, whether you are abroad or not. Copies will not do, original documents required. Even on a pootle around the bay HMCE have the right to inspect your boat's VAT status, and impound the boat if you cannot prove that VAT is paid. Of course this does not happen, but they are the rules.

<hr width=100% size=1>Adventures of the VAT unpaid <A target="_blank" HREF=http://www.xrayted.fsnet.co.uk>Teddy Bear Boat</A>