Bloody 'ell.... MP actually doing something on the VAT issue!!!

[goeasy123]

Sir Peter Bottomley, MP for Worthing goes into bat for us yotties. Quote....

"I turn to some small issues. One is the VAT treatment of yachts that are being brought back to this country—it may be a small point, but I think that the Treasury or VAT people should look at it. If VAT is paid on a yacht that is then kept abroad for more than three years, it has to be paid again when the yacht is brought back. That will not produce any revenue, because no one will bring their boats back.

All our important nautical brokerage in this country depends on those yachts being here, so we should either bring in a marine passport or lower the rates that are above 5%. We should have talks with the Royal Yachting Association and get on with finding a solution, not just say, “It is the way the thing has to be.” It is not the way the thing has to be; it is not right, and it will not work. I confess an interest, but my boat is an open canoe, not a boat that is affected by the 5% rate or the 20% suggestion".

 

[lustyd]

While I dislike the idea of a marine passport (I assume for the boat), it might at least properly answer the question of evidence of current status which seems to be the main point of confusion in the whole mess. Good to see it being discussed, let's hope he gets somewhere!

 

[RupertW]

No chance they will break the agreement for boats nor should they as it will jeapardise the the EU vat paid status of boats kept there.

 

[Tranona]

No chance they will break the agreement for boats nor should they as it will jeapardise the the EU vat paid status of boats kept there.

Payment of VAT in these circumstances is nothing to do with the agreement, nor is it now anything to do with the EU. VAT rules are now under UK control and can easily be changed. It would have no effect on boats now with EU VAT status because of the agreement as only boats that were taken from the UK are eligible for RGR and in most cases the original VAT was paid in the UK - and are still in the same ownership. It only affects a relatively small number of people and boats, although the number would increase if it also included boats originating in the UK that had subsequently changed ownership.

There would be no effect on EU paid status as such boats could qualify for RGR under EU rules if returned within 3 years by the same owner.

 

[goeasy123]

Payment of VAT in these circumstances is nothing to do with the agreement, nor is it now anything to do with the EU. VAT rules are now under UK control and can easily be changed. It would have no effect on boats now with EU VAT status because of the agreement as only boats that were taken from the UK are eligible for RGR and in most cases the original VAT was paid in the UK - and are still in the same ownership. It only affects a relatively small number of people and boats, although the number would increase if it also included boats originating in the UK that had subsequently changed ownership.

There would be no effect on EU paid status as such boats could qualify for RGR under EU rules if returned within 3 years by the same owner.

You're right about the small number of boats. But, as Bottomley suggests, the real issue is wider than the first order affect on owners. The real impact is on the UK boat serving industry and the NEGATIVE impact on tax returns to the UK exchequer.

Major UK boat builders are now, as a matter of course, advising clients to buy boat 'non-UK tax paid for export'. The loss of tax on a single big boat sail will wipe out anything HMRC might gain from all returning boats. And what about all the business that UK equipment retailers, riggers, shipwrights et al will lose?

 

[lustyd]

advising clients to buy boat 'non-UK tax paid for export'.

This is not right. There isn't a choice as to what tax to pay, customers must pay the tax due based on where they buy the vessel, and then on where they move it and keep it. If I want a boat in Portsmouth then I can absolutely buy in in Jersey tax free but as soon as I import it to the UK then the tax is due regardless. None of this has anything to do with boat builders, they just advise the easiest way to buy their wares.

 

[Bodach na mara]

Tax authorities and Governments used to stick to some principles of fairness in taxation. The first was that a tax should only be paid once on any item or service. The second was that taxes and duties shouldn't be compounded. The second was ignored by the UK government when they applied fuel tax compounded with duty. The first has been followed up till now and they should be reminded that requiring someone to pay VAT on a boat that has had that tax paid before is not only unfair, it is immoral and akin to theft.

 

[goeasy123]

This is not right. There isn't a choice as to what tax to pay, customers must pay the tax due based on where they buy the vessel, and then on where they move it and keep it. If I want a boat in Portsmouth then I can absolutely buy in in Jersey tax free but as soon as I import it to the UK then the tax is due regardless. None of this has anything to do with boat builders, they just advise the easiest way to buy their wares.

You're only right if you're a UK buyer wanting to sail in the UK. If you're a buyer resident in the UK or anywhere else you can get the boat delivered for export.

PLEASE UNDERSTAND... forget our plight as UK boat owners when making the case to HMRC. That's a very poor argument compared to.... 'Mr HMRC...
1. You're decision is ****ing over UK marine businesses.
2. You are LOSING net tax revenues.'

Am I making my point clearly enough?

 

[Tranona]

You're only right if you're a UK buyer wanting to sail in the UK. If you're a buyer resident in the UK or anywhere else you can get the boat delivered for export.

PLEASE UNDERSTAND... forget our plight as UK boat owners when making the case to HMRC. That's a very poor argument compared to.... 'Mr HMRC...
1. You're decision is ****ing over UK marine businesses.
2. You are LOSING net tax revenues.'

Am I making my point clearly enough?

There is no loss to HMRC. It has always been possible to buy a boat from a UK dealer and have it delivered elsewhere without paying VAT in the UK. When we were in the EU the principle was that VAT should be paid where the boat was put into use, not necessarily where it was bought. Most of the UK dealers worked with this, although customers had the option of taking delivery in the UK, paying VAT and then moving the boat to another EU state as it would have free circulation. It was also possible for a buyer to avoid paying VAT altogether IF the boat left the EU completely. This concession was very strictly policed to ensure that any boat used in the EU by an EU resident paid VAT somewhere.

Brexit has changed this and UK dealers are no longer able to offer new boats for use in the new EU if VAT is paid in the UK. Given that sales to UK residents for use in the EU is a big part of their business, particularly at the upper end it makes sense to quote ex VAT and then add it where the boat is delivered as rates vary from state to state. Far from being restrictive it is a way of preserving some of the business that would otherwise go to EU based dealers. It still allows UK dealers to commission boats in the UK and then export them to the EU without paying UK VAT so there is value added to both the dealer and the UK economy. Probably few buyers will take advantage of this and have the boat delivered direct to their chosen location in the EU, but the UK dealer will still make a profit. Dealers often have stock boats delivered to the UK in anticipation of a sale, so they are still able to sell for outside the UK to either a UK or non UK resident.

What will likely be hit is the trade in used boats between the UK and EU because VAT will be payable in the state of delivery. So customers will have limitations on choice and brokers etc will have less to offer.

 

[Tranona]

Tax authorities and Governments used to stick to some principles of fairness in taxation. The first was that a tax should only be paid once on any item or service. The second was that taxes and duties shouldn't be compounded. The second was ignored by the UK government when they applied fuel tax compounded with duty. The first has been followed up till now and they should be reminded that requiring someone to pay VAT on a boat that has had that tax paid before is not only unfair, it is immoral and akin to theft.

VAT is a transaction tax NOT an asset tax, so the tax is not levied on the boat, but on buying the boat, but only once as subsequent transactions are not taxed. Importing a boat is a transaction so subject to VAT. If it were not the case then importers would have an unfair advantage over local producers. To avoid the most obvious unfairness of a person taking goods on which VAT has been paid out of the VAT area the RGR rules allow them to be brought back by the person who took them out with a normal limit of 3 years. For boat owners this has been largely workable because the "exception" bit in the rules coped with the very small numbers who returned after more than 3 years.

The issue now is that there are many more British owned boats, mainly in the Med that could qualify but have been out for more than 3 years and are either having difficulty in getting back, made worse by Covid or would like to retain the option in the future. The current concession is that the 3 years does not apply until June 2022 which might help most of those who really want to get their boats back into the UK and potentially lose their current EU VAT paid status.

My view is that this will quickly disappear as an issue as the number of people and boats affected will become very small, either because those who really want to come back will manage it in the time scale and others will decide that they are better off leaving the boat there and eventually selling it.

 

[RupertW]

Payment of VAT in these circumstances is nothing to do with the agreement, nor is it now anything to do with the EU. VAT rules are now under UK control and can easily be changed. It would have no effect on boats now with EU VAT status because of the agreement as only boats that were taken from the UK are eligible for RGR and in most cases the original VAT was paid in the UK - and are still in the same ownership. It only affects a relatively small number of people and boats, although the number would increase if it also included boats originating in the UK that had subsequently changed ownership.

There would be no effect on EU paid status as such boats could qualify for RGR under EU rules if returned within 3 years by the same owner.

You are working on that. The agreement explicitly dictated the 31/12/20 VAT rule and the VAT status being either EU or UK but not both afterwards.

 

[Graham376]

You are working on that. The agreement explicitly dictated the 31/12/20 VAT rule and the VAT status being either EU or UK but not both afterwards.

You can have both, if RGR criteria met. My boat is based in EU with EU VAT paid status as it was there on 31/12. As I took (exported) the boat out of the UK, I can return it before June 2022 and can claim RGR to keep UK VAT paid status. As RGR also applies in the EU, I can then take it back again within 3 years to maintain status there. A shuffle to and fro every 3 years will main status in both territories*.

EDIT. - * As long as it remains in my ownership. If I sell the boat, from then on it will only have VAT paid status in the territory in which it was located at the time of sale.

 

[goeasy123]

There is no loss to HMRC. It has always been possible to buy a boat from a UK dealer and have it delivered elsewhere without paying VAT in the UK. When we were in the EU the principle was that VAT should be paid where the boat was put into use, not necessarily where it was bought. Most of the UK dealers worked with this, although customers had the option of taking delivery in the UK, paying VAT and then moving the boat to another EU state as it would have free circulation. It was also possible for a buyer to avoid paying VAT altogether IF the boat left the EU completely. This concession was very strictly policed to ensure that any boat used in the EU by an EU resident paid VAT somewhere.

Brexit has changed this and UK dealers are no longer able to offer new boats for use in the new EU if VAT is paid in the UK. Given that sales to UK residents for use in the EU is a big part of their business, particularly at the upper end it makes sense to quote ex VAT and then add it where the boat is delivered as rates vary from state to state. Far from being restrictive it is a way of preserving some of the business that would otherwise go to EU based dealers. It still allows UK dealers to commission boats in the UK and then export them to the EU without paying UK VAT so there is value added to both the dealer and the UK economy. Probably few buyers will take advantage of this and have the boat delivered direct to their chosen location in the EU, but the UK dealer will still make a profit. Dealers often have stock boats delivered to the UK in anticipation of a sale, so they are still able to sell for outside the UK to either a UK or non UK resident.

What will likely be hit is the trade in used boats between the UK and EU because VAT will be payable in the state of delivery. So customers will have limitations on choice and brokers etc will have less to offer.

A UK resident can buy a boat in the UK and have it delivered tax not-paid. As a citizen of a 3rd country to the EU the UK resident can now take advantage of TI (or TA). If you talk to Berthon (amongst others) they will tell you this. So while they should logically be making more money along with the likes of Discovery and Oyster. The tax man in the UK is not collecting the tax. That said, as a consequence of Brexit Berthon have redirected investment away from their UK operations in favour of Spanish and Swedish operations.

The practicality of the situation is that the UK is losing out. HMRC's decision = tax man looses, business looses, boat owners loose.

 

[RupertW]

You can have both, if RGR criteria met. My boat is based in EU with EU VAT paid status as it was there on 31/12. As I took (exported) the boat out of the UK, I can return it before June 2022 and can claim RGR to keep UK VAT paid status. As RGR also applies in the EU, I can then take it back again within 3 years to maintain status there. A shuffle to and fro every 3 years will main status in both territories.

I think that will be struck down if the EU ever takes us to arbitration on that. That example breaks the principle that pre-Brexit location of VAT payment should be deemed to be the place that the boat was on 31/12/20.

 

[Tranona]

A UK resident can buy a boat in the UK and have it delivered tax not-paid. As a citizen of a 3rd country to the EU the UK resident can now take advantage of TI (or TA). If you talk to Berthon (amongst others) they will tell you this. So while they should logically be making more money along with the likes of Discovery and Oyster. The tax man in the UK is not collecting the tax. That said, as a consequence of Brexit Berthon have redirected investment away from their UK operations in favour of Spanish and Swedish operations.

The practicality of the situation is that the UK is losing out. HMRC's decision = tax man looses, business looses, boat owners loose.

Does not matter what Berthon says, as a resident in the UK TA is not open to you. Very clearly stated in VAT Notice no8 that only non residents can apply for TA by showing that the boat is non resident owned and registered outside the UK. Citizenship is irrelevant. Under the personal export scheme the seller would have to show that the boat was exported from the UK or would be liable to pay the VAT due.

Do you really think HMRC would leave such a wide loophole open, particularly as the rules on VAT for personal export were tightened only recently?

 

[Tranona]

I think that will be struck down if the EU ever takes us to arbitration on that. That example breaks the principle that pre-Brexit location of VAT payment should be deemed to be the place that the boat was on 31/12/20.

Why do you think that? EU have the RGR rules which are unchanged. It is nothing to do with the UK so fail to see how any arbitration will come about. It is all about owners of boats with EU status taking advantage of the rules. How many will actually bother is of course an unknown as is the actual process individual states will adopt.

 

[RupertW]

Why do you think that? EU have the RGR rules which are unchanged. It is nothing to do with the UK so fail to see how any arbitration will come about. It is all about owners of boats with EU status taking advantage of the rules. How many will actually bother is of course an unknown as is the actual process individual states will adopt.

Let’s watch this space

 

[lustyd]

You're only right if you're a UK buyer wanting to sail in the UK. If you're a buyer resident in the UK or anywhere else you can get the boat delivered for export.

PLEASE UNDERSTAND... forget our plight as UK boat owners when making the case to HMRC. That's a very poor argument compared to.... 'Mr HMRC...
1. You're decision is ****ing over UK marine businesses.
2. You are LOSING net tax revenues.'

Am I making my point clearly enough?

Yes, and the EU VAT or other local taxes are due. There's no choice in which taxes you pay, as I said, you have to pay the tax due based on where the boat goes. There's literally nothing there for a builder to advise or have a view on, it's simply the law.

There is no situation where someone would want a boat for export and pay UK taxes before they leave. That's also not advice, again it's just the way the taxes work.

 

[Graham376]

I think that will be struck down if the EU ever takes us to arbitration on that. That example breaks the principle that pre-Brexit location of VAT payment should be deemed to be the place that the boat was on 31/12/20.

What I've said is how VAT law applies in UK and EU. I think the original statement released was badly worded and aimed at where boats were normally based so, if (say) your boat is UK based and had not been resident in the EU, then it no longer had EU paid status, fair enough maybe. UK HMRC have already stated that RGR will be allowed for boats returning soon after several years of absence, provided they meet the criteria. As Tranona says, EU internal rules haven't changed so, where do you see a problem?

 

[Tranona]

Let’s watch this space

Have you seen something that others have not seen that suggest there might be an issue? Although the EU may seek to review their rules, there is no indication that they will, and because there has been so little movement of boats in and out of the EU since January there is little practical experience of how individual states will apply the rules. However as Graham says the rules are there and have not been changed by Brexit. The agreement only settles VAT status on the day. After that the EU rules on RGR and TA stay the same and UK VAT rules apply in respect of boats in the UK. There is now no connection between them.