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

[dunedin]

So in reading these responses, sounds like there are three sub-strands of issues (& opportunities?) related to Boat VAT in a No Deal situation:

(A) Recognition of the boats VAT paid status whilst the existing owners are cruising in EU waters
(but putting aside here the separate subject of rights of individuals to be in EU area for whatever time period - a separate topic)

(B) Retaining the value of VAT paid for resale of specialist / high value boats which are likely to be resold into a European wide market

(C) Opportunities for UK residents to buy boats in future VAT free and save a packet - again possibly one for a separate thread (and lets not lay odds on whether UK VAT on boats falls post Brexit !)

Thanks for all the inputs. So the only idea so far is an adaption of the traditional "sell in May and go away" (but do earlier)

 

[GrahamM376]

Maybe not very different, but a yacht can be treated as a ship, and ships have slightly special treatment.
Quickly gets complex.

You can read here how private vessels are treated at the moment. Whether in future we will be treated as coming from outside the EC as treated at the moment, will depend on any agreement made. I do think it's important that boat paperwork is updated so there can be no doubt that VAT has been paid (where due) whilst in the EU.

https://www.gov.uk/government/publi...ailing-your-pleasure-craft-to-and-from-the-uk

 

[Tranona]

I appreciate your wide knowledge on this topic, and yes we all may HOPE that things will get sorted to aid yachtsmen with RYA's list and inputs ..... BUT "rich yachtsmen" (the usual press terminology) may not be high on the list of the Government's priorities as time starts to run out. And this thread was specifically on the contingency of No Deal being agreed, so reverting to letter of current EU law for non member states / boats.

Hence the whole point of this thread is to assess whether there are any things one can do to mitigate any adverse impacts in the event of a No Deal Brexit. Indeed, that process of reviewing potential future outcomes to identify any mitigating actions is the essence of Contingency Planning.

Indeed one potential action has been identified - sell ahead of March 2019. Perhaps extreme, but perhaps not if an individual has a lot of value held in VAT paid and planning on changing boats in the near future anyway.

The other potential action suggested by a pundit, was to ensure their (UK Flagged and VAT paid) boat was within EU waters on exit date. Not sure why they suggested this, but could that have any contingency value?

Unless you know what the new rules are you cannot have a contingency. The only way as you suggest of avoiding any negative impact is to sell your boat then you have nothing to worry about - but not sure many would want to do this. However you could do what my buyer did and buy a boat that was VAT paid in one of the remaining EU states.

I thought I had explained why I think there will not be a simple reversion to the current third country rules, but just to remind you there are big problems in defining what and is not a a "third country" boat as if you define it as VAT paid in UK then it will include a significant number of boats owned by EU residents or citizens and located both in and out of the EU and on the other hand a similarly large number of EU VAT paid boats owned by UK citizens and existing third country citizens. Not convinced that location of the boat at a given point in time will be critical. For one thing that would be decided in advance and could cause a mass movement to EU ports just for the day! I know it was important in the 1992 accession and in the 1998 RCD rules, but in both cases it was a pragmatic way of dealing positively with the past - even if it did throw up some minor anomalies.

Not sure why you keep talking about state of registration as this is irrelevant to VAT status. The only time it comes into play is as part of the current TA rules which require the boat to be both owned by a third country citizen or resident and registered in a non EU state. Using this as a precedent registration may become a factor in the future, but maybe not as a prime determinant of status.

The original basis for the special VAT rules for pleasure boats was to close loopholes and ensure that VAT was collected on transactions that were commonly cross border involving a highly mobile asset. Requiring evidence of payment to allow free movement was part of that, as was TA to control the movement of genuine visitors while ensuring that VAT was paid if the visiting boat was sold in the EU.

As I suggested, undoing the current rules and formulating new ones that are fair to both UK and remaining EU boat owners is not as simple as the 1992 rules for accession to the EU so I don't think the UK will become just another third country. That is not optimism, but pragmatism.

 

[Fr J Hackett]

A hypothetical case: A UK flagged vessel VAT (TVA) paid in say France or Holland but of no fixed abode spending say 6 months in the EU waters and 6 months in UK waters. How is that going to pan out?

 

[Irish Rover]

I don't think the UK will become just another third country. That is not optimism, but pragmatism.

I personally can't see the U.K. becoming anything other than just another 3rd country. That is not pessimism that's realism. There may be transition arrangements where U.K. citizens who have VAT paid UK flagged boats will be permitted to re-register them in an EU flag state if they meet the relevant local requirements in relation to residency etc and vice versa.

 

[dunedin]

So an interesting article on just this topic in the Cruising Association March magazine, from their Regulations & Technical Services (RATS) Group.

I don't feel that I have the right to replicate their content here (though if any RATS members on the forum feel free to add), but certainly from their usual rigorous approach they seem to have concluded:
1) Boat location, inside or outside EU on Brexit date, could be a material factor in maintaining/"reinforcing" the EU VAT paid status - certainly this is one key factor they use in their scenarios;
2) A boat kept outside EU (eg in the UK) for 3 years would lose EU VAT status.
3) A boat sold outside EU (eg in UK) would lose EU VAT status.
All of this is presumably under current rules, assuming no special ("cake and eat it"?) deal is agreed for yachts.

So presumably regular trips to Cherbourg, Dublin or Stavanger might be needed to maintain EU status, and/or if selling the boat on?

 

[dunedin]

Coincidentally the RYA Current Affairs bulletin refers to their aspirations in this area - specifically "The RYA wants recreational boats to retain Union Goods status once the UK has left the EU".
However, how close this aspiration is to being met remains unclear, with the main status being "the RYA is maintaining its regular dialogue with HMRC ....... to ensure that its position is taken into account by policy makers". Not sure they can do any more, but where this will fit in the priority queue for negotiations remains to be seen.

Don't know if this RYA area is open to non-members or members only, but hopefully many/most here are members so will be able to access this link:
http://www.rya.org.uk/knowledge-adv...nion-goods-status-for-recreational-boats.aspx

 

[dom]

So an interesting article on just this topic in the Cruising Association March magazine, from their Regulations & Technical Services (RATS) Group.

but certainly from their usual rigorous approach they seem to have concluded:
1) Boat location, inside or outside EU on Brexit date, could be a material factor in maintaining/"reinforcing" the EU VAT paid status - certainly this is one key factor they use in their scenarios;
2) A boat kept outside EU (eg in the UK) for 3 years would lose EU VAT status.
3) A boat sold outside EU (eg in UK) would lose EU VAT status.
All of this is presumably under current rules, assuming no special ("cake and eat it"?) deal is agreed for yachts.

The 'could' is fine, but there's nothing rigorous about all those 'woulds'.

If CA VAT thinking is truly based on the "cake and eat it" soundbite, then it's really only pub musings and certainly not a serious prognosis.

Edit: the RYA assessment, however, makes much more sense.

 

[Joker]

And what is the RYA assessment other than 'pub musing'? We don't know as yet. The CA puts forward scenarios which already exist for non EU boats. If we leave the EU, then those rules might well begin to apply to us.

 

[Tranona]

And what is the RYA assessment other than 'pub musing'? We don't know as yet. The CA puts forward scenarios which already exist for non EU boats. If we leave the EU, then those rules might well begin to apply to us.

The difference is that the RYA is proposing solutions via those in government responsible for negotiating rather than just gathering possibilities of what might happen based on existing rules. As you will see from earlier posts, that approach does not deal with the complexity of the changed environment. The current third country rules were based on a simple scenario that defined EU boats by reference to either VAT paid or being in the EU on a certain date. Every thing else was third country. That simple distinction would be unworkable now with reference to existing boats with a connection to the UK.

 

[Irish Rover]

I think people are being overly optimistic in their expectations. The UK decided to leave the EU and nobody in the EU is going to be anxious to facilitate the UK or it's citizens in any respect unless there is a quid pro quo of at least equal value and equal importance to EU citizens. I don't know the figures but I'd imagine there are far more UK owners who want to sail and/or keep their boats in the EU than is the reverse. I also think snotty yachties will be well down everyone's list of priorities and while orgnisations like the CA and RYA will get a polite hearing from officials no civil servant or politician is going to be naive enough to say this is an important issue for the UK in the scale of things. As I said before I think there will be a transition period where owners of UK registered, VAT paid boats will have the option to put them on an EU country register subject to satisfying other requirements such as residency/nationality and vice versa and then the UK will become just another 3rd country and boats visiting the EU will be subject to TI. Back to the issue at hand - contingency planning. As I said before rent an Irish or French granny and get an EU passport.

 

[dom]

As I said before I think there will be a transition period where owners of UK registered, VAT paid boats will have the option to put them on an EU country register subject to satisfying other requirements such as residency/nationality and vice versa and then the UK will become just another 3rd country and boats visiting the EU will be subject to TI. Back to the issue at hand - contingency planning. As I said before rent an Irish or French granny and get an EU passport.

Bringing nationality distinctions relating to an asset’s beneficial owner into UK/EU VAT laws would be unworkable and isn’t going to happen.

 

[lw395]

Bringing nationality distinctions relating to an asset’s beneficial owner into UK/EU VAT laws would be unworkable and isn’t going to happen.

UK and EU VAT laws are not known for being free of unworkable complication.

 

[macd]

UK and EU VAT laws are not known for being free of unworkable complication.

I suspect that what dom is in part getting at (and he'll no doubt correct if I'm mistaken) is that changing flag or passport nationality is largely irrelevant since the principle determinant of EU VAT liability is the owner's country of residence. Under the worst case ('third country') scenario, a German citizen resident in the UK and owning a boat VAT-paid there, would be in precisely the same position as a Brit with similar circumstances.

 

[pandroid]

I suspect that what dom is in part getting at (and he'll no doubt correct if I'm mistaken) is that changing flag or passport nationality is largely irrelevant since the principle determinant of EU VAT liability is the owner's country of residence.

That's just not true. The VAT status of a vessel is unconnected to the residence of its owner. Its related to the Vat status of the vessel itself. (i.e. Its paid or not). This can be changed by the vessel being 'exported' from the EU.

 

[Irish Rover]

The point I was making is that if it is beneficial to move the boat onto an EU flag then having an EU passport may facilitate that.

 

[Tranona]

The point I was making is that if it is beneficial to move the boat onto an EU flag then having an EU passport may facilitate that.

Don't think there is any basis for that suggestion.

Just to be clear, VAT status and freedom of circulation is solely related to where VAT was paid, which is normally (according to the rules) in the state where the vessel is first used. Residence, citizenship or flag of registry of the payer of VAT or any subsequent owner is all completely irrelevant.

That is why any new system to deal with the tens of thousands of boats potentially affected by Brexit cannot be a simple reversion to the 1992 regime.

You are right, though it will depend on reciprocity in a potentially asymmetric situation, although as we have seen so far there is eventually a solution. however, the cynics may argue that the solution seems to require the UK to give while the EU takes!

 

[lw395]

....

Just to be clear, VAT status and freedom of circulation is solely related to where VAT was paid, which is normally (according to the rules) in the state where the vessel is first used. Residence, citizenship or flag of registry of the payer of VAT or any subsequent owner is all completely irrelevant.
.....!

It is far from certain that this will continue to be the case post Brexit.
A British owned boat, based in Britain, not in the EU on Brexit Day, would fairly logically not be treated as EU VAT paid.
Even if the VAT was originally paid in France.

The UK is leaving the EU and taking its boats with it.

 

[SolentSnowgoose]

I can only share my own contingency planning...

1) Base boat in EU on Brexit day on the basis that EU vat was originally paid in UK and that it will not be brought into The EU after Brexit day.

2) Obtain T2L not to establish VAT status but to establish credentials as UNION GOODS and hence entitled to free circulation in the EU.

Biggest risk then appears to be HMRC claiming that VAT is due when boat is brought back To UK in a few years time. Only comfort is that at least that fight will be in English !

Have also explored extended visas for individual EU countries but have found that living on a boat may not count as a place of residence.

British Marine (BMIF), RYA and Cruising Association (CA) have all published initial ideas and have groups working on this.

 

[GrahamM376]

It is far from certain that this will continue to be the case post Brexit.
A British owned boat, based in Britain, not in the EU on Brexit Day, would fairly logically not be treated as EU VAT paid.
Even if the VAT was originally paid in France. The UK is leaving the EU and taking its boats with it.

As long as the boat remains in the same ownership, its status isn't likely to change. I think the chargeable event will be if it later changes hands across borders, same as buying a boat in Turkey now and bringing it into EU.