Bad VAT advice from a broker?

[CaptainBob]

I think a broker I'm talking to has given me very incorrect VAT advice. They are selling a vessel which was manufactured outside of the EU in the early 1990s. Vessel has unknown history before 3 UK owners', last of which purchased in 2006. There is no documentation available at all relating to the VAT paid status of the vessel.

Here's the broker's comments on this:

"Any sale through BROKERNAME would certainly satisfy Tax paid and VAT concerns as part of our process"

I said that I felt that was not the case and they said:

"The vessel has previously been sold between two private individuals, VAT therefore ends and does no longer apply"

Has something now changed in relation to VAT on used boats? Or is this broker mistaken?

 

[southerly]

In Germany (still EU) any boat built after 1968 needs to be VA taxed according to Para.28 of guideline 92/111/EWG. In Germany older boats may be "certified"by the vendor in the sales contract as "being correctly taxed".
Maybe HMS customs proceed similarly.

 

[Phideaux]

I think a broker I'm talking to has given me very incorrect VAT advice. They are selling a vessel which was manufactured outside of the EU in the early 1990s. Vessel has unknown history before 3 UK owners', last of which purchased in 2006. There is no documentation available at all relating to the VAT paid status of the vessel.

Here's the broker's comments on this:

"Any sale through BROKERNAME would certainly satisfy Tax paid and VAT concerns as part of our process"

I said that I felt that was not the case and they said:

"The vessel has previously been sold between two private individuals, VAT therefore ends and does no longer apply"

Has something now changed in relation to VAT on used boats? Or is this broker mistaken?

I suspect that not only has the VAT obligation not been met (or is unproven) but there may be a liability for the CE type approval unless it is CE marked.

 

[nimbusgb]

There is no vat payable on used boats sold between two private individuals.

But the boat you are concerned with must have or has yet to pay vat on entering the EU.

Get the brokers 'comments' in writing on a company letterhead and add to your offer to purchase a clause 'subject to proof of vat paid status'

or walk away!

Also what Phideaux said. CE mark and documents required!

 

[nimbusgb]

In Germany (still EU) any boat built after 1968 needs to be VA taxed according to Para.28 of guideline 92/111/EWG. In Germany older boats may be "certified"by the vendor in the sales contract as "being correctly taxed".
Maybe HMS customs proceed similarly.

1968 or 1986? The latter I think.

 

[southerly]

1986 is the correct year, sorry for that.

 

[npf1]

I'm reasonably familiar with the VAT legisaltion from the late 1990s (but as far as I am aware, the same applied previously) - any boat manufactured outside the EU in the early 1990s should have evidence of VAT being paid. The below covers most scenarios:

If boat was supplied new in EU - the importer would have had to charge VAT to the first owner. If owner was a private individual, that would be the end of if. If owner was a company, VAT may have been reclaimed (if one of the subsequent sales was to a private individual, VAT would have been paid at that point). In any of these cases, I would want documentation showing the VAT had been paid.

If boat was imported as 'used' into EU. Vessel should be 'VAT paid' or 'VAT deemed paid'. In either case, there should be paperwork to show it.

As there is no paperwork in this case, you're right to tread carefully.

The RYA have a publication that covers all sorts of VAT issues - it might deal with the situation of a sale via brokerage and if the 'buck stops there'.

Good luck

 

[Tranona]

Be very wary. In part he is right in that sales between two private citizens do not give rise to any VAT liability, so lack of evidence may not be a problem.

However, you need to get back to the point when it originally entered the EU. If it was imported by, say, a dealer then the chances of there being any VAT issues are minimal as the initial sale to a private individual would have been just the same as one from a UK builder. But if it was privately imported then the responsibility for paying VAT would lie with the private importer who would have paid direct to HMRC and there would be an HMRC receipt that should stay with the boat. If you bought such a boat, although you would not be personally responsible for unpaid VAT, the sting is the debt would stay with the boat. So, in theory if HMRC could not recover from the original importer person they could enforce the charge on the boat.

So the critical issue is to trace its history back to the time it came into the EU and take a view on the probability that VAT was not paid at that point. If it was "officially" imported, probably OK without evidence. If privately imported evidence defiinitely required.

One could argue that the vendor will sign that there are no outstanding charges against the boat which means in theory he will still be responsible for any undisclosed charges and so on back down the line, but you make take the view that the potential hassle is not worth it - or reduce your offer price to take into account any potential charge.

On a more positive note, the fact that there have been 3 changes of ownership and no questions raised suggests there is unlikely to be any problem.

BTW if it was in the EU before 1998 then RCD/CE is not an issue.

Hope its a nice boat and worth the effort to find out.

 

[npf1]

BTW: if the vessel was 'in service' in the EEA prior to June 1998, the RCD/CE stuff is irrelevent.

 

[dansar]

.

Get the brokers 'comments' in writing on a company letterhead and add to your offer to purchase a clause 'subject to proof of vat paid status'

or walk away!

Which I did. But then found the same boat with another, more helpful broker. Made the same offer but less 17.5%.

Accepted and I paid the VAT direct. It didn't cost me any extra money and I've got the boat and a bit of paper to say VAT has been paid. The only person to lose out was the seller.

I'm happy.

dansar

 

[capsco]

Who did you pay the VAT to and why?

If it was because it was not VAT paid,then perfectly normal but if it was because no paperwork you may have paid it & not needed to.

 

[nigelmercier]

There is no vat payable on used boats sold between two private individuals. But the boat you are concerned with must have or has yet to pay vat on entering the EU.

A friend has just bought a boat built in the EU, bought from a broker in the UK, then immediately moved to another EU country. She was later moved out of the EU for a few years, and is now back again.

However, as the 3rd or 4th owner in a private sale chain, he has no documents regarding the VAT status. How can he check this without kicking the hornet nest?

 

[Seven Spades]

The original broker should be able to provide a copy of the original invoice.

 

[Tranona]

A friend has just bought a boat built in the EU, bought from a broker in the UK, then immediately moved to another EU country. She was later moved out of the EU for a few years, and is now back again.

However, as the 3rd or 4th owner in a private sale chain, he has no documents regarding the VAT status. How can he check this without kicking the hornet nest?

It really depends on who owned it when it moved back into the EU. If it was the same person who took it out (that is it did not change hands outside the EU) then normally no VAT would be due.

It is important to understand that VAT is not an asset tax - that is it is not payable on a boat per se, but a transaction tax. So you need to look at a transaction to determine if it was a "chargeable event". So a boat entering the EU is a chargeable event unless it is subject to a limited number of exemptions (of which an EU resident returning with his previously EU boat). Sales from a VAT registered entity are chargeable events, but sales from one private person to another within the EU are not.

There is no way of checking against an individual boat as there is no record kept, other than by the original vendor - and that for only 6 years. The only record is the original receipt. If it was sold by a builder/dealer it wiill be on their paper, if a private import it will be an HMRC receipt.

 

[dansar]

Who did you pay the VAT to and why?

If it was because it was not VAT paid,then perfectly normal but if it was because no paperwork you may have paid it & not needed to.

After talking to the RYA legal dept and the VAT office in Bristol it was all explained to me in great detail:-

"The only conclusive proof that is acceptable to HMRC that a vessel is VAT paid is the original (or copy) paperwork proving that VAT was paid (either at the time of purchase, importation or in the case of a home built boat, when the materials were purchased).

A vessel's VAT status is not only important when boats are changing hands, it is the VAT paid status that entitles a boat owner to freely cruise the waters of other EU member states without onerous customs formalities."

The previous owner had died and there was no evidence at all as to regard the VAT, RCD or even basic instrumental paperwork.

As I stated in my post earlier my offer was accepted, less the 17.5%, and now have a HMRC receipt of VAT paid in full and letter from HMRC stating that my boat has VAT Paid Status. Didn't cost me any more and if anyone in the future asks for the proof then I just show them the paperwork. Job done, no arguments, no worries and if I ever want to sell then I have the proof.

Anyone who thinks they don't need any VAT payment evidence then I would think again. One day you might get a knock on the boat hull from some official asking for details. It might not happen. It's your choice.

dansar

 

[Tranona]

What made you think that VAT might not have been paid?

It is not an offence not to have a receipt. Lack of paperwork is common with boats because there is no legal requirement to keep any - including the VAT receipt.

Nobody is going to knock on your hull asking for evidence unless they have a belief that an offence has been committed. You cannot commit an offence as a non VAT registered person unless you have imported a boat as a personal import.

So, unless there is something about the boat that suggests an offence has been committed involving a transaction with the boat, you have probably wasted your money.

 

[capsco]

Knocking the 17.5% off was a good move on your part.

I would then have kept it in my bank, if and when you came to sell you could also have reduced the price by VAT, "IF YOU HAD NEEDED TO", your boat value may well have reduced by this time, you may then have made a saving.

 

[Deleted member 36384]

.... Anyone who thinks they don't need any VAT payment evidence then I would think again....

Interesting Post. CaptainBob, I think my following question is in the spirit of your question, so hope you dont mind. When I purchased my 1973 UK built boat 2 years ago the Broker said that due to its age it precedes requirements to prove VAT. I have no evidence of original ownership or what happened to the boat when it was purchased. I know for a fact that the builders records have been destroyed. I have circumstantial opinion that the boat has always been in the UK. So, in this case, could I be asked to prove that VAT has been paid?

OK - Before I posted the above (I have started so I will continue) - I went to the RYA Site and read their VAT FAQ. The boat is deemed VAT Paid under the "Age Related Relief Scheme" if the following documentary evidence is available.

That the boat was in use as a pleasure craft on 1st January 1985, documentary evidence in support of this is required, evidence in support may take the form of : Part I Registration; Marine Survey; Builder’s Certificate; or insurance documents.
AND
That the boat was moored in the EU on 31st December 1992, again documentary evidence in support of this is required in the form of: receipt for mooring; dry dock records; boatyard repair invoice; or receipt for harbour dues.

So technically I could still get a knock on the hull.

 

[dansar]

Thanks for your replies. I'm happy with my decisions and I take on board your comments.

I think if anyone wants to be doing the right thing then they should take advice from HMRC and perhaps have a word with the RYA.


dansar

 

[capsco]

Interesting Post. CaptainBob, I think my following question is in the spirit of your question, so hope you dont mind. When I purchased my 1973 UK built boat 2 years ago the Broker said that due to its age it precedes requirements to prove VAT. I have no evidence of original ownership or what happened to the boat when it was purchased. I know for a fact that the builders records have been destroyed. I have circumstantial opinion that the boat has always been in the UK. So, in this case, could I be asked to prove that VAT has been paid?

OK - Before I posted the above (I have started so I will continue) - I went to the RYA Site and read their VAT FAQ. The boat is deemed VAT Paid under the "Age Related Relief Scheme" if the following documentary evidence is available



So technically I could still get a knock on the hull.

Technically yes but highly unlikely.