Buying through a Broker.

[Tranona]

The relationship between broker and buyer also depends whether the broker owns the boat privately or as part of the business. As a "private" seller the broker pays no VAT but If it is the brokerage that owns it then how does that affect the VAT status?
When the broker acts as agent VAT is payable only on the commission. However if the brokerage company (assuming it is VAT registered) owns it should it charge VAT on the selling price and reclaim the VAT on the purchase price like any retail item?

As with secondhand cars VAT is only payable on the "profit". The sale does not affect the VAT "status" of the boat. Status in inverted commas because it is just a short hand way of saying that the evidence of VAT payment is sufficient to show that no VAT is due.

 

[Tranona]

Perhaps, but I note that brokers of high repute - I believe jonic is among them - would like to see the profession properly regulated. After all, the idea that there is nothing special about the job sits ill with the notion that yacht selling is a uniquely complicated business.

Nothing new about that. Occupational groups have a long history of wanting to limit those who can practise, right back to the medieval guilds. There are plenty of other trades just as complicated or even more than yacht broking that do not have regulation or protected status.

The trend over the last few years has been towards less rather than more regulation - opening up rather than closing down opportunities. Regulation is only needed if there is a clear public (usually consumer) interest, special knowledge, or opportunities for fraud deriving from the activity. Regulation of Financial Services and provision of clinical services spring to mind.

In these instances laws and offences specific to the activity are often passed as they are not covered by general law. Difficult to see how any yacht broking activities would fall into that category. Does not mean forming an association with a set of rules and entry requirements is not a good thing (as exists for surveying and broking) but not enough to give such a body exclusive rights.

 

[JumbleDuck]

Regulation is only needed if there is a clear public (usually consumer) interest, special knowledge, or opportunities for fraud deriving from the activity.

So what happened to all that "yacht buying is uniquely complicated, what with VAT, title, RCD, loan status, liens (cont. p94) so it's absolutely essential to have a skilled professional do it" stuff?

 

[Tranona]

So what happened to all that "yacht buying is uniquely complicated, what with VAT, title, RCD, loan status, liens (cont. p94) so it's absolutely essential to have a skilled professional do it" stuff?

Dig out your picture of Mandy again!

You could say that about many other occupations - relevant one for me now could be.

"Building Regulations are uniquely complicated so it is essential to have a skilled professional do it"

Despite there being recognised "professional" occupations (complete with "Royal" society designations) that you could engage to deal with it, my advisers hold no qualifications other than the structural engineer.

There are factions in our own occupation who would like to see restrictions placed on who could teach in Universities, although it is not so long since this was relaxed with the passing of tenure in some institutions.

As we have seen over and over again using a restricted occupation does not necessarily remove the risk of incompetence or fraud. Given that there seems to be very little real evidence of either in the yacht broking business difficult to make a case for any restrictions.

Anyway, as you might have seen John is now chairman of the trade body so you would expect him to follow the party line!

 

[theoldsalt]

As with secondhand cars VAT is only payable on the "profit". The sale does not affect the VAT "status" of the boat. Status in inverted commas because it is just a short hand way of saying that the evidence of VAT payment is sufficient to show that no VAT is due.

Yes if the brokerage is selling the boat in effect VAT is payable on the profit but the brokerage will have to issue a VAT receipt for the total amount on the transaction. The new owner will therefore have two VAT receipts; the original one and a new one presumably with quite different VAT amounts paid.

 

[Tranona]

Yes if the brokerage is selling the boat in effect VAT is payable on the profit but the brokerage will have to issue a VAT receipt for the total amount on the transaction. The new owner will therefore have two VAT receipts; the original one and a new one presumably with quite different VAT amounts paid.

Not correct. I have just discussed this with a broker/dealer and there is no VAT, just a receipt from the dealer for the full amount , plus a Bill of Sale for title. The original VAT invoice, if available goes with the boats papers along with previous BofS, registration etc. VAT on dealer's profit is dealt with through the "margin" scheme, not the invoice for the transaction.

 

[theoldsalt]

Not correct. I have just discussed this with a broker/dealer and there is no VAT, just a receipt from the dealer for the full amount , plus a Bill of Sale for title. The original VAT invoice, if available goes with the boats papers along with previous BofS, registration etc. VAT on dealer's profit is dealt with through the "margin" scheme, not the invoice for the transaction.

Tranona,

I think you may have missed my point. If the brokerage owns the boat (ie not acting as broker for the owner) and is VAT registered it will be expected to pay VAT to HMRC on the sale and reclaim any VAT on the purchase. Just like any business selling any product that is not zero rated. And as a buyer I should be entitled to a VAT receipt on my purchase. I do not see that a boat should be treated any differently to any other product. When I buy a commercial vehicle from a dealer I get charged VAT and receive a VAT receipt.

 

[Tranona]

Tranona,

I think you may have missed my point. If the brokerage owns the boat (ie not acting as broker for the owner) and is VAT registered it will be expected to pay VAT to HMRC on the sale and reclaim any VAT on the purchase. Just like any business selling any product that is not zero rated. And as a buyer I should be entitled to a VAT receipt on my purchase. I do not see that a boat should be treated any differently to any other product. When I buy a commercial vehicle from a dealer I get charged VAT and receive a VAT receipt.

he has not paid any VAT on the purchase assuming it was from a private person or a non VAT registered company, therefore he has no input to reclaim.

It works just like a second hand car - NOT a commercial vehicle. VAT is paid by the dealer on his margin - that is the difference between his purchase price (or Pex allowance) and selling price. HMRC VAT Notice No 718/1 explains the scheme and how it works.

The essential principle is that as the dealer did not pay VAT on the purchase, if he charged VAT on the whole sale value it would add 20% to the price, or reduce his receipts from the sale by that amount as he does not have any input VAT. So he just calculates VAT using the method in section 3 of the notice.

An example is the boat I just part exchanged for an agreed value of £43k, which was deducted from the full invoice value of my new boat. That is his acquisition cost, so if he sells it for £45k he will pay VAT of £333 out of the £2k margin as in section 3.3. If he sells for less than £43k he will not pay any VAT. The buyer will get a receipt for the full amount he pays, whatever it is, with no mention of VAT, although of course he will get (in this case) a receipt for the VAT I paid in Greece!

If it were any different dealing in used cars (or boats!) would simply not work. As dealers like the one I bought my boat from also deal in new boats where VAT is accounted for in the normal way they have to ensure that they have a system in place that correctly accounts for VAT to HMRC using the appropriate method for the transaction.

 

[theoldsalt]

Tranona,

Thank you for taking the trouble to explain.

It goes to show how complicated VAT is and that many of us still don't fully understand it even though it has been inexistence for many years and why many of us also rely on our accountants to get it right for us.

 

[grumpy_o_g]

Interesting point. Has the broker committed an offence if they do not make this clear? The broker who sold me my boat didn't: an excerpt from an email thread between us:

"Thanks for the email. I understand you predicament with the other boats.
Unfortunately, I will not be able to get him to that level. The xxx is an expensive boat but I will not be able to get him to £xxxxxx.
How about if I can get the boat down to £xxxxxx including the table and a full tank of fuel? I am assuming the owner will go for this as the table is £xxxx ."

At the time this email was written the broker owned the boat which he had bought, without my knowledge, two months earlier from "him" - the previous owner. This was revealed in the previous bill of sale , disclosed after purchase. A well known, national brokerage chain, BTW.

Definitely misrepresentation at least. He is representing the boat as being owned by someone else whereas in fact he has purchased the boat himself and is no longer acting as the broker but as the vendor.

 

[Tranona]

Tranona,

Thank you for taking the trouble to explain.

It goes to show how complicated VAT is and that many of us still don't fully understand it even though it has been inexistence for many years and why many of us also rely on our accountants to get it right for us.

Actually when you get into it, things are nowhere near as complicated as you think. Suppose I have an advantage having spent half my life teaching Accounting and Finance at university, but never "worked" at it. However, when I retired I did consultancy work for a few years and was VAT registered. Much of my work was for international clients which was free of VAT if it qualified by type of work. So I had to get myself up to speed. Not difficult as HMRC guidance notes are pretty good (as in the example I used above) and the local small business adviser very helpful when I started. All in the past now - but I still have all my returns filed away because you have to keep them for 6 years!

 

[Tranona]

Definitely misrepresentation at least. He is representing the boat as being owned by someone else whereas in fact he has purchased the boat himself and is no longer acting as the broker but as the vendor.

While not good practice, it would only be an issue if he could show that he had lost out as a consequence of being misled. Does not seem to be the case here.