Boat VAT – any contingency planning possible for a Brexit No Deal?

[dunedin]

I suspect the OP is rather less bothered about HM Customs than comparable bodies elsewhere. After Brexit, a T2L issued by HMRC will quite possibly be of less value in the EU27 than the paper it's printed on.

However, there will very likely be some sort of transitional arrangements agreed in due course. Little point in getting lathered about it just yet. And, lest anyone think we're a tiny niche and likely to be overlooked, many of the fiscal and regulatory issues are part and parcel of 'modes of transport' measures, which will have a rather bigger claim on negotiators' attention.

You are right, it is not the U.K. HMRC aspect that was the concern in this thread - it’s the EU side.

And hopefully there may be transition arrangements - but this thread is specifically about any contingency planing possible in the event these do not transpire as time runs tight.

 

[dunedin]

Sell the boat before Mar-19 ?

This is probably the only firm contingency measure for this scenario so far. Indeed possibly a worthwhile option for some if sitting on a substantial VAT paid asset and planning to change boats in the next few years anyway.
But hassle, broker fees etc may make less attractive for most.

 

[dunedin]

I am not sure about that.
A boat in this context will be not very different from most other used 'consumer semi-durable goods'.
Do you expect to be able to freely import and export cars, random household goods etc between the EU and UK in 2020?

It is a minefield, with various ill-defined promises about rights of individuals to retain residence etc having been made.
I would hope there would be get-outs for people moving back to their country of origin, but that is not the same as selling your used yacht in 'the single market'.

As a general principle, I don't think we can regard HMCE as the yachtsman's friend. Let alone their EU counterparts.

Personally, I think if I had a UK registered yacht, or one owned by UK domiciled people, based in the med, I would be assuming that in 2020, it would have much the same treatment as a non-EU yacht does now.
So contingency planning might be along the lines of sell soon, spend time in Turkey or maybe do the ARC?

Perhaps a realistic if unwelcome scenario.
(Though don’t understand the Turkey or ARC bits - Turkey is a bit of a long way from here and not sure it helps the VAT status. Sailing away via ARC and keeping going might be a forget about it solution

 

[dunedin]

It will be GB VAT paid. <> EU VAT paid.

At present, if you sell a boat outside the EU, it become non-vat-paid if it comes back,
Fairness does not come into it.

And that is perhaps the nub of the risk here. The resale value of a boat is only realised by a sale.
So if our boats are treated as EU VAT unpaid when sold after May 2019, this reduces the value by the VAT element where the likely buyer is EU wide.
NB. Clearly there is a big difference here between selling say a traditional British boat (Moody / Westerly / Sadler) or smaller AWB, where the target buyers are probably U.K. only, versus selling a more specialist / expensive / European boat (eg HR, Arcona, X, JPK, RM, etc) where market is more EU wide.

 

[Tranona]

You are right, it is not the U.K. HMRC aspect that was the concern in this thread - it’s the EU side.

And hopefully there may be transition arrangements - but this thread is specifically about any contingency planing possible in the event these do not transpire as time runs tight.

All this discussion and speculation is pointless as there is nothing you can do to change what might apply to an existing boat. Everything will be determined by what the transition arrangements are and what the agreement is about how boats bought in the UK after the "date" will be treated. There are all sorts of possibilities and the issue of movement of pleasure boats is one of the 3 key areas the RYA has on its list when working with the govt.

Worth mentioning once again that state of registration is completely irrelevant as is citizenship and/or residence of owners. The only thing that will matter is where VAT was paid and possibly location of boat. However the rules agreed will be published in advance of any implementation and it is highly unlikely that there will be any loopholes of significance.

 

[superheat6k]

...

At present, if you sell a boat outside the EU, it become non-vat-paid if it comes back,
Fairness does not come into it.

Whereas this should be the case, I was informed by the RYA that a Channel Island purchase of a boat previously exported there from inside the EU fell outside this rule, but could never find out just how. I got into quite a discussion on the subject with the broker concerned, and the RYA supported his position - Customs Notice 8 did not.

The vendor then suggested I would have to rely upon his occasional visits to France which had maintained its EU VAT paid status, which I suggested was not acceptable.

Anyway I bought a different non VAT paid boat and paid the VAT on it.

 

[steve yates]

As the owner of a an old 1974 £4.5k boat, I'm guessing the vat issue has no relevance for me. If sold, the boat would be sold in the uk anyway. The right to remain in Europe waters for any length of time however, that would be a much bigger concern, but not one that any contingency planning could practically solve at this stage.

 

[lw395]

.....
Worth mentioning once again that state of registration is completely irrelevant as is citizenship and/or residence of owners. The only thing that will matter is where VAT was paid and possibly location of boat. .....

I am not sure that this is correct.
If I buy something in France today, I pay French VAT on it. I am free to bring it to the UK without paying UK VAT.
Come 2020, if I want to sell it in France, that will be an export/import and LeVAT will be due in France.
Where it's been in the meantime is of little consequence.
I think it might be treated as a break in its VAT status.

The same as, currently, if I take a UK VAT paid yacht to the US, sell it in the US and someone else tries to re-import it to the UK, VAT will be due.

The way I see it, we are leaving the single market. The single market for boats, cars and motorbikes will cease to include the UK.

I'm not sure in actual law, how a yacht is different from any other chattel you might be travelling with? Say I sell my Rolex abroad. Beyond limits, allowances and what's unenforceable, VAT is probably due?

 

[lw395]

As the owner of a an old 1974 £4.5k boat, I'm guessing the vat issue has no relevance for me. If sold, the boat would be sold in the uk anyway. The right to remain in Europe waters for any length of time however, that would be a much bigger concern, but not one that any contingency planning could practically solve at this stage.

There is no actual right to freely remain in the waters of another EU country. Google the 'Greek Cruising Tax'.

 

[RupertW]

There is no actual right to freely remain in the waters of another EU country. Google the 'Greek Cruising Tax'.

I think there is a right and one we would sorely miss as we move around the Med - countries also have a right to charge but they cannot prevent EU boats cruising their waters.

VAT wise I think we should be fine as we paid VAT in Croatia when they joined so our only issue would be if we tried to sail the boat back to the UK for an extended period or sell it there (if there is a no deal).

Our right to holiday for as much and as long as we like around EU countries may be an issue so I'm getting an Irish passport for that. The fact the boat is UK SSR registered shouldn't matter as its EU VAT paid and I will be an EU citizen owning it. SSR will be a bit like Delaware flagged - convenient unregulated registry outside the EU.

 

[npf1]

...selling a more specialist / expensive / European boat (eg HR, Arcona, X, JPK, RM, etc) where market is more EU wide.

Mine is firmly in the category - much more likely to get interest from French/Dutch/German buyers, if it were placed on the market. Might be just 'cleaner' to flog it before exit, so as not to risk a £25k+ hit.

 

[Tranona]

I am not sure that this is correct.
If I buy something in France today, I pay French VAT on it. I am free to bring it to the UK without paying UK VAT.
Come 2020, if I want to sell it in France, that will be an export/import and LeVAT will be due in France.
Where it's been in the meantime is of little consequence.
I think it might be treated as a break in its VAT status.

The same as, currently, if I take a UK VAT paid yacht to the US, sell it in the US and someone else tries to re-import it to the UK, VAT will be due.

The way I see it, we are leaving the single market. The single market for boats, cars and motorbikes will cease to include the UK.

I'm not sure in actual law, how a yacht is different from any other chattel you might be travelling with? Say I sell my Rolex abroad. Beyond limits, allowances and what's unenforceable, VAT is probably due?

You are mixing things up here. There are two issues. Firstly and perhaps most importantly for most of us is freedom of circulation and the second is VAT liability on a sale.

The first currently allows all EU VAT paid (or deemed paid) to move anywhere in the EU (and be sold without any further VAT liability). Third country boats are limited by the TA rules. The fear, if that is the right word, is that third country rules will apply after we leave the EU, even for boats that are currently EU VAT paid, but paid in the UK. personally I think this is unlikely, although suspect there will be some sort of restriction, t least for boats that pay UK VAT after the leave date agreed. Remember that there are many boats that will be owned by EU residents and citizens where VAT was paid in the UK, so there will be an issue of reciprocity -- unlikely that these people (and their governments) will accept restrictions!

The second issue of paying VAT a second time also brings in complexities for the same reason. Many people in the UK own boats where VAT was paid in another EU state so one assumes these will move freely and sold in the EU without further tax. However, if VAT was paid in the UK a sale to an EU resident who wants to keep the boat in the new EU could conceivably be liable to a further tax - but again reciprocity makes this unlikely.

These are some of the problems the negotiators on both sides have to deal with. In some ways it is easy because, yes, pleasure boats do have rules on VAT specific to them, both as means of transport and in relation to conditions for free movement. Part of the problem they will have to deal with is that the current rules are not as clear as they might be, have been passed into law by states differently and enforced variably. So don't expect any new rules to be crystal clear nor be free of areas of unfairness and dispute.

 

[lw395]

You are mixing things up here. There are two issues. Firstly and perhaps most importantly for most of us is freedom of circulation and the second is VAT liability on a sale.

The first currently allows all EU VAT paid (or deemed paid) to move anywhere in the EU (and be sold without any further VAT liability). Third country boats are limited by the TA rules. The fear, if that is the right word, is that third country rules will apply after we leave the EU, even for boats that are currently EU VAT paid, but paid in the UK. personally I think this is unlikely, although suspect there will be some sort of restriction, t least for boats that pay UK VAT after the leave date agreed. Remember that there are many boats that will be owned by EU residents and citizens where VAT was paid in the UK, so there will be an issue of reciprocity -- unlikely that these people (and their governments) will accept restrictions!

The second issue of paying VAT a second time also brings in complexities for the same reason. Many people in the UK own boats where VAT was paid in another EU state so one assumes these will move freely and sold in the EU without further tax. However, if VAT was paid in the UK a sale to an EU resident who wants to keep the boat in the new EU could conceivably be liable to a further tax - but again reciprocity makes this unlikely.

These are some of the problems the negotiators on both sides have to deal with. In some ways it is easy because, yes, pleasure boats do have rules on VAT specific to them, both as means of transport and in relation to conditions for free movement. Part of the problem they will have to deal with is that the current rules are not as clear as they might be, have been passed into law by states differently and enforced variably. So don't expect any new rules to be crystal clear nor be free of areas of unfairness and dispute.

Can you provide evidence for any of this?
It sounds like wishful thinking to me.
I believe that, in 2020, the UK will be outside the EU. Importing a boat, or changing its ownership will be exactly like buying one from an American or an Australian.
Unless the vendor is legally tax resident in the EU, then it would be a simple sale within the EU.

Where the VAT was paid pre-brexit will not be the question. At present we are in a customs union where goods VAT paid in one country are treated as VAT paid in the whole EU.
Whatever goods I own on Brexit day, they are VAT paid, wherever I bought them. That will not change.
The determinant will be whether the boat is 'resident' in the EU on Brexit day. I think 'resident' would mean based there and belonging to a person with EU citizenship.
A boat belonging to a tourist passing through remains foreign, whether that tourist is English or Canadian.

The system where it's possible to have to pay VAT a second time is well established.

 

[Lucky Duck]

Can you provide evidence for any of this?
It sounds like wishful thinking to me.
I believe that, in 2020, the UK will be outside the EU. Importing a boat, or changing its ownership will be exactly like buying one from an American or an Australian.
Unless the vendor is legally tax resident in the EU, then it would be a simple sale within the EU.

Where the VAT was paid pre-brexit will not be the question. At present we are in a customs union where goods VAT paid in one country are treated as VAT paid in the whole EU.
Whatever goods I own on Brexit day, they are VAT paid, wherever I bought them. That will not change.
The determinant will be whether the boat is 'resident' in the EU on Brexit day. I think 'resident' would mean based there and belonging to a person with EU citizenship.
A boat belonging to a tourist passing through remains foreign, whether that tourist is English or Canadian.

The system where it's possible to have to pay VAT a second time is well established.

+1

 

[Tranona]

Can you provide evidence for any of this?
It sounds like wishful thinking to me.
I believe that, in 2020, the UK will be outside the EU. Importing a boat, or changing its ownership will be exactly like buying one from an American or an Australian.
Unless the vendor is legally tax resident in the EU, then it would be a simple sale within the EU.

Where the VAT was paid pre-brexit will not be the question. At present we are in a customs union where goods VAT paid in one country are treated as VAT paid in the whole EU.
Whatever goods I own on Brexit day, they are VAT paid, wherever I bought them. That will not change.
The determinant will be whether the boat is 'resident' in the EU on Brexit day. I think 'resident' would mean based there and belonging to a person with EU citizenship.
A boat belonging to a tourist passing through remains foreign, whether that tourist is English or Canadian.

The system where it's possible to have to pay VAT a second time is well established.

No more wishful thinking then your more negative "belief".

The only basis for your thinking is that the current third party rules will apply - but you have already shown how this is difficult and unlikely. Your suggestion that tax residence of the owner has anything to do with VAT is just wrong. VAT is a transaction based tax so your residence whether for tax purposes or not is completely irrelevant. The freedom of movement on boats is solely dependent on VAT status, irrespective of who the owner is or where s/he resides. Just think about how many non EU residents or citizens own EU VAT paid boats and as I suggested above how many current EU residents own boats where the VAT was paid in a state other than the one where they are resident or citizens. For example I owned a boat where I paid VAT in Greece. For some time it was kept in Greece although I was resident in UK. Then sailed to UK and kept here. Now sold to another UK citizen and currently kept in Spain. Logically post Brexit it can continue in Spain (or any other of the 27 remaining members) even though the owner would then be living in a third country.

So, your simplistic belief in reversion to the current third country rules simply won't happen as it will leave many boats and owners both from UK and EU in limbo.

BTW the current rule on second liability for VAT is very specific as it was established for the specific circumstances in 1992 which did not allow for a member leaving the EU. So it will only apply if it is specifically stated in the new treaty that covers our exit - along with all the other new rules that will need to be established to cover the new situation - some of which I have identified above.

 

[macd]

The determinant will be whether the boat is 'resident' in the EU on Brexit day. I think 'resident' would mean based there and belonging to a person with EU citizenship.

I think you perhaps mean a person who is EU resident. Citizenship is irrelevant so far as VAT is concerned. (On balance I think your anticipation of events less likely than Tranona's, but neither is impossible.)

 

[Irish Rover]

Whatever happens it's going to be a 2 way street. If VAT becomes payable a 2nd time on boats being sold out of the U.K. to Europe then presumably U.K. VAT will become payable on EU boats being imported into the U.K. regardless of their tax status in the EU. In that event it will be easier for someone in the UK to sell their boat in the U.K. because any imports will be subject to an additional 15/20% or whatever VAT. If you want to buy from outside the U.K. you take the hit. Talk about selling your boat to a mate in Ireland and buying it back for €1 or enlisting the help of Irish Travelers is, in my view, complete nonsense. If you do want to do something sensible to make your life easier after Brexit then rent or invent an Irish granny and get yourself an EU passport. The most sensible statement I saw so far on this thread was from Tranona #25 when he said "All this discussion and speculation is pointless as there is nothing you can do to change what might apply to an existing boat" and it's a great pity he didn't finish his contribution at that.

 

[st599]

Whatever happens it's going to be a 2 way street. If VAT becomes payable a 2nd time on boats being sold out of the U.K. to Europe then presumably U.K. VAT will become payable on EU boats being imported into the U.K. regardless of their tax status in the EU. In that event it will be easier for someone in the UK to sell their boat in the U.K. because any imports will be subject to an additional 15/20% or whatever VAT. If you want to buy from outside the U.K. you take the hit. Talk about selling your boat to a mate in Ireland and buying it back for €1 or enlisting the help of Irish Travelers is, in my view, complete nonsense. If you do want to do something sensible to make your life easier after Brexit then rent or invent an Irish granny and get yourself an EU passport. The most sensible statement I saw so far on this thread was from Tranona #25 when he said "All this discussion and speculation is pointless as there is nothing you can do to change what might apply to an existing boat" and it's a great pity he didn't finish his contribution at that.

Presumably if you're a sailing school using the boat for commercial purposes, you'd need some sort of temporary import licence to take a working boat to the EU too?

 

[awol]

Surely all that will be necessary is to sail across the channel (the North yin, that is) to Noriron and then cross the invisible, open, tarriff-free, border with Eire that both sides have promised and you are in the EU with no restrictions on transferring goods.

 

[Tranona]

The most sensible statement I saw so far on this thread was from Tranona #25 when he said "All this discussion and speculation is pointless as there is nothing you can do to change what might apply to an existing boat" and it's a great pity he didn't finish his contribution at that.

Could not agree more in relation to the original question in the thread which was about contingencies. The subsequent posts are more about what the rules might be and that actually makes any discussion irrelevant. How can you have a contingency plan if you don't know what the rules will be?

However it is legitimate to discuss what the rules might be, and you can see there are different views about both what is desirable and what is possible, although some of the views are perhaps based on misunderstandings of the principles underlying the current rules which lead to complexity in undoing them and formulating new ones. This is not the only subject where seemingly simple rules become very complex when you try to recast them particularly when you have no idea as to what the relationship between the UK and EU will be.

So, just a microcosm of what we hear daily on the news and the differing views here reflect those in evidence in the daily discourse in the media - which in turn reflects the views of the population as a whole.