Cheap boats in America

[Triassic]

I confess I'm no tax expert Mac but my understanding was that only one VAT value is held by the taxman.

If a boat is bought new and immediately exported you don't have to pay VAT, so it figures when you then try to import it back you have to pay up.

If the boat is secondhand when you export it my understanding is you can't then go to the taxman and ask for the VAT back, so they continue to hold the value and you therefore don't have to pay them again when it comes back.

If you think about it when you buy a 20 year old second hand yacht all you look for is proof that VAT has been paid on that vessel. You don't have any record necessarily of where it has been since so it could just have easily have been back and forth across the pond as sat in a south coast marina. There is no requirement that I am aware of that we need to document an uninterrupted EU ownership of our vessels unless you are saying differently.

 

[macd]

I fully understand your misgivings, Triassic, but if an EU boat is sold outside the EU, VAT becomes due on re-import whatever its previous history*. In fact it doesn't need to go very far to trigger this: the Channel Isles would invoke the same deal. As said, plenty of detail on this earlier in the thread if you care to look.

As I explained, what you call the 'VAT value' is not related to the boat. It is related to an event...in this case, the import of the boat.

*There is a possible exception to this, but it does not apply here.

To save you the trouble, here's the word from the horse's mouth: https://www.gov.uk/government/publi...ailing-your-pleasure-craft-to-and-from-the-uk
3.5 Can a vessel lose its VAT paid status?
VAT is due on the importation of any vessel from outside the EU. However, there are provisions for this VAT to be relieved when an EU VAT paid vessel returns to the EU, refer to sub-section 3.4. If an EU VAT paid vessel leaves the EU, and whilst outside the EU it is sold, the new owner will, unless eligible for one of the reliefs described in this Notice, be liable to pay VAT if the vessel is brought back into the EU.
The sub-section 3.4 relief mentioned is this:
A boat previously VAT paid and exported from the EU may also qualify for relief on return if:
imported normally within 3 years of its export from the EU
imported by the person who exported it from the EU
it has undergone no more than running repairs outside the EU that did not increase its value
Clearly these do not apply in your friend's case.

 

[Tranona]

I confess I'm no tax expert Mac but my understanding was that only one VAT value is held by the taxman.

If a boat is bought new and immediately exported you don't have to pay VAT, so it figures when you then try to import it back you have to pay up.

If the boat is secondhand when you export it my understanding is you can't then go to the taxman and ask for the VAT back, so they continue to hold the value and you therefore don't have to pay them again when it comes back.

If you think about it when you buy a 20 year old second hand yacht all you look for is proof that VAT has been paid on that vessel. You don't have any record necessarily of where it has been since so it could just have easily have been back and forth across the pond as sat in a south coast marina. There is no requirement that I am aware of that we need to document an uninterrupted EU ownership of our vessels unless you are saying differently.

HMRC do not hold any record of VAT payment. As macd says, VAT is a tax on events or transactions and importing a boat is a VAT able event. If, however the person who exported a VAT paid boat re-imported it he could avoid VAT by using the Returned Goods Relief rule, although there is a time limit on this. So the typical blue water adventuring doing an ocean passage and returning to the EU does not pay VAT again.

However, if the boat changes hands outside the EU, that relief is no longer available and HMRC would treat the return as an import and VAT (and duty if applicable) would be charged on the value. This is all explained in the HMRC FAQ sheet on the RYA site.

As to what happens when you buy a secondhand boat in the EU, that is not a "chargeable event" - that is sales between private residents. However the only reason for looking for the original VAT payment is to ensure that the tax was charged in the last "chargeable event", which would have been the original purchase. However, this is not definitive proof that there has not been a further event so you would look for an unbroken chain of title changes in the EU between private residents.

You are right in saying that if the boat has been in and out of the EU it might be difficult to check, but that does not alter the fact that if one of the title changes took place outside the EU then you would want to see that VAT was properly accounted for at the time of re-importation. It is a criminal offence not to declare a boat on importation - to either claim a relief or pay VAT.

Fortunately for most this scenario is rare, but if buying a boat that has a history of movement in and out of the EU it is prudent to ensure that all has been done legally. The potential downside of buying an illegally imported boat is that the tax liability follows the boat, although the offence stays with the person who did the importing.

 

[macd]

Just to add a little to Tranona's post, Triassic.
He wrote that "HMRC do not hold any record of VAT payment". This is absolutely the case in the general run of things. If a boat is bought new, the dealer submits a VAT return. This is not itemised in any way. The dealer simply adds up all the things on which he has charged VAT, offsets that against any VAT he has paid and may reclaim, and sends the balance (which may be plus or minus) to the VAT man. The VAT man hasn't the foggiest clue about what boats the dealer has sold.

Pretty much the only time the VAT man can identify a particular boat with a particular VAT payment is if the money passes directy to them...such as on a boat imported by a private individual from outside the EU. Your friend with the Westerly could have shown you the very receipt for this...if he'd followed the rules. He evidently didn't so would be well advised to keep his head down.

 

[Triassic]

I'm not doubting your knowledge Mac, you clearly know a whole lot more about this than I do, but I am querying an apparent hole in the rules if you like, one that we could be vulnerable to, or choose to exploit depending on our position.

If I use my boat as an example. It was built in the US in 1992 and I have the original builders certification and bill of sale. These show it was exported new to a dealer in the Netherlands who then sold it to a German owner. I have paperwork for this sale including documentation that shows the VAT was paid by the German.
I also have a copy of a bill of sale that shows the boat changed hands in the UK in 2000, but neither of the parties involved were the German or the person I bought the vessel from.

Now I don't have much experience of these things, Triassic is my first boat, but I was told at the time I bought her that as far as paperwork on second hand boats goes this was fairly good.

I have no way of knowing, or showing, where my boat was between 1992 and 2000, or between 2000 and 2012 when I bought her. She could easily have been exported outside the EU, changed hands several times, and bought back in at any time.

Where would I stand now if it came to light that in 2002 for example my boat was exported outside the EU and returned in 2006 without VAT being paid?

As far as I am aware under British law there is no requirement to prove or document ownership history of a yacht, possession is everything.

This being the case how on earth do we ever establish if VAT is due or not on a yacht that has documentation to show that it was paid at some point in her life? Surely the assumption is that it is still paid unless someone can prove to the contrary, hence your original advice to "keep quiet" about where my friend bought it from?


Edit: two posts above whilst I was typing..... just reading them to see if you read my mind!

Edit 2. Yes you did and my questions answered, thanks. I wonder how many people can prove the complete sale/purchase history of their yacht!

 

[macd]

Hi again, Triassic.

All your points make complete sense to me.
VAT makes complete sense to no-one*. (And by 'no-one' I include HMRC.)

In other words, bizarre though it is, very few EU boat owners can 'prove' beyond doubt that their boat has complete VAT bona fides. Most owners can provide evidence, sure, but not absolute proof. That's just the way it is.

* Just to be clear: it really doesn't make sense for things such as yachts. We just happen to be stuck with it because overall it's an efficient and economical (to the treasury) way of collecting revenue.

 

[Tranona]

You are no different from most other boat owners in the UK. There is no legal requirement to register a boat or document sales, although of course most people do. It is different in most other states which have some form of registration and recording of taxes paid.

You are right in a way that there are potential holes and the lack of consistent documentation also presents a problem for authorities. However it is not so easy to hide the history of a boat and unexplained gaps would, of should, raise concerns with a potential buyer. There is good information on tracing title on the RYA site, or you can get a broker to do the checks for you. Ultimately though there may be no certainty and a buyer then has to decide, knowing the possible consequences, whether to proceed or not.