checking vat status

[cloud7]

have any members of the forum been asked for for vat status documentation in uk , spain or portugal.i have been looking at a few yachts 'tax not paid' , how does this work, views appreciated.

 

[macd]

have any members of the forum been asked for for vat status documentation in uk , spain or portugal.i have been looking at a few yachts 'tax not paid' , how does this work, views appreciated.

Assuming you're talking about used boats for sale inside the EU, it probably means that the previous owner was a VAT registered company (perhaps a charter company), which paid the VAT when it bought the vessel, then claimed it back. (Yes, I know, it's bonkers.)

Assuming that is so, you'd be liable to pay VAT on the price you pay, at the rate of the country in which you bought the vessel (or the EU country into which you first import it if bought outside the EU). It's not clear whether you're asking about buying in Spain or Portugal, but current rates are Portugal, 23%, Spain, 18%.

As to the first part of the question, I've been asked only once about VAT status, by a rib-full of marines in the Scillies. "She's exempt," I told them. "OK," they said and promptly sped off.
I personally know of no-one who's had to produce VAT evidence, but it does happen.

 

[dt4134]

There seems to be a hell of a lot of confusion regarding how a VAT registered company (or individual etc.) works.

The company charges VAT on 'supplies' (what they sell) and pays VAT on 'acqusitions' (what they buy). At the end of the period (3 months for a small company) they report the totals to HMRC and pay the difference (or if it is negative they get some money back).

If the seller is VAT registered, which is the most likely case here, the seller is responsible for accounting for the VAT. They CANNOT sell you the boat at a VAT free price and expect you to account for the VAT to HMRC, no more than a High Street shop can.

So you simply pay the price you settle on, they give you a VAT invoice, and they account for the VAT to HMRC.

I bought my boat that way. I simply mentioned that the price I was offering included VAT and I expected a VAT invoice. The broker (who owned the boat - hence the VAT issues) simply agreed, no discussion, no fuss, (but as I've owned two VAT registered companies I was fully prepared for any discussion).

 

[macd]

Everything that dt4134 says is true. I was VAT-registered myself until a few years ago.

However, one often sees boats offered for sale in Greece, and Turkey, described as "VAT (or tax) not paid." As dt says, if the seller is a VAT-registered company within the EU, it should account for the VAT. I'm not sure this always works out that way in practice: whether you're expected to pay the VAT on top of the asking price (to the only person you can pay to, the seller).

Since Turkey isn't in the EU, there's a well-known (legal) scam whereby a boat offered or sale in Turkey hops across to Greece for the actual sale, thus preserving its EU VAT-paid status if it has one. If the sale were concluded in Turkey, VAT would be payable on re-import to the EU, even if it had already been paid there at some point in the past.

It would very much help if the OP were more specific about the circumstances of the boat in question.

 

[jonic]

have any members of the forum been asked for for vat status documentation in uk , spain or portugal.i have been looking at a few yachts 'tax not paid' , how does this work, views appreciated.

Yes it does happen. I have now heard of this in Spain, Holland and Greece.

It is becoming increasingly important to have a solid vat paid history if going overseas, and the response will vary from port to port in individual countries.

Interestingly this year I attended a lecture from HMRC who said that eu countries can now get involved on each others behalf.

 

[Tranona]

have any members of the forum been asked for for vat status documentation in uk , spain or portugal.i have been looking at a few yachts 'tax not paid' , how does this work, views appreciated.

The reason they are offered like this is because the VAT can only be paid when the boat is sold. This is because VAT is a tax on the transaction, not the boat. As has already been said, the owner will be VAT registered and will have reclaimed VAT as an input tax. If you are buying such a boat you agree a price without VAT and then he invoices you at that price plus VAT. Of course you have to do the sums to ensure that the final price is comparable to buying a similar boat privately where there is no VAT to pay.

One of the advantages of buying a boat this way is that if you are a VAT registered businesss and the boat is to be a business asset, you can treat the VAT (if HMRC accept it) as an input. So if you were buying an existing charter boat and keeping it as such, with a business to support it, you could reclaim VAT, but then have to charge it when you sell on. You cannot reclaim VAT on a boat bought privately.

This all assumes that the boat is already owned in the EU. Be aware that if it has been inmported from outside the EU then the onus is on the importer, not you, to pay VAT and ensure that it complies (unless exempt) with the RCD.

As to the importance of having the document, it appears that very few boats are checked, particularly older boats. However the sort of situation that might attract interest is a boat with a history of corporate ownership or which has been privately imported so it makes sense to be extra careful and ensure that the documentation is correct.

My boat is an ex charter boat and the VAT was paid on a reduced value when it came out of charter. I have a receipt which shows VAT paid and a letter from the vendor (the charter management company) explaining how the value and VAT was arrived at. My case is slightly different in that I was always the beneficial owner of the boat, but it was formally owned by a Greek company and then ownership transferred to me at the end of the management contract.

Remember you have to pay VAT in the state where the transaction takes place and that is acceptable across the EU. Any queries about VAT will then be the responsibility of that state. So although my boat is now in the UK HMRC have no jurisdiction over VAT as any issue to do with proper accounting rest with the Greek authorities and the vendor.

 

[Grumpybear]

Assuming you're talking about used boats for sale inside the EU, it probably means that the previous owner was a VAT registered company (perhaps a charter company), which paid the VAT when it bought the vessel, then claimed it back. (Yes, I know, it's bonkers.)

Assuming that is so, you'd be liable to pay VAT on the price you pay, at the rate of the country in which you bought the vessel (or the EU country into which you first import it if bought outside the EU). It's not clear whether you're asking about buying in Spain or Portugal, but current rates are Portugal, 23%, Spain, 18%.

As to the first part of the question, I've been asked only once about VAT status, by a rib-full of marines in the Scillies. "She's exempt," I told them. "OK," they said and promptly sped off.
I personally know of no-one who's had to produce VAT evidence, but it does happen.

I also got bounced in the Scillies. we were boarded by three black suited men in a RIB while picking up a mooring at the end of our passage from Falmouth. I was asked for, and produced, proof which I happened to have on board. one of the HMRC heroes read each document in the trail from first import bythe Jeanneau dealer to my purchase, and told his intellectual mate what to write in his notebook. off they went, leaving nasty black marks from their commando boots on my decks. They also told me that they were spending the weekend boarding any British flagged boat manufactured elsewhere, checking for VAT status. What a lovely way to spend a summer weekend at taxpayers' expense!

A week later I had a letter from HMRC in Bristol claiming that I had not produced the first bill of sale. I faxed them everything I had shown his mates and got a very ologetic letter back confirming that VAT had been paid. I keep this on board for future use.

 

[multihullsailor6]

have any members of the forum been asked for for vat status documentation in uk , spain or portugal..

I was checked out by two friendly members of the Border Agency when I was moored in Brighton. The most important issue for them seemed to be the VAT status of my boat to which I could produce a confirmation from the Dutch authorities, which I had translated myself into English, that VAT had been paid on my boat.

I was not checked out in Portugal and so far neither in Spain.

 

[jonic]

Remember you have to pay VAT in the state where the transaction takes place and that is acceptable across the EU. Any queries about VAT will then be the responsibility of that state. So although my boat is now in the UK HMRC have no jurisdiction over VAT as any issue to do with proper accounting rest with the Greek authorities and the vendor.

Tranona you are correct , however the last HMRC VAT lecture I attended threw up a surprise, in that they said member states can now help each other collect if there is not some form of evidence of vat paid.

He cited an example of a hypothetical yacht being boarded by the boarder agency and the issue coming to light as a result of that boarding.

 

[PeterGibbs]

have any members of the forum been asked for for vat status documentation in uk , spain or portugal.i have been looking at a few yachts 'tax not paid' , how does this work, views appreciated.

I was asked to show VAT documentation last summer in Holland. For the first time ever. I produced the original invoice.

The real question is: what does this piece of paper - now 12 years old - prove to anyone, and is it capable of being checked or verified not least by a couple of officials bobbing about on a boat on the canals?

Answer - they can't. But that's not the transaction is it? These guys don't have to be forensic experts, their skills are their senses in judging your reaction when asked the question. If they sus a lie, guess what might happen next?

Always, in these matters, the authorities can impose a charge, and challenge you to prove
you shouldn't pay it. That's not a situation most of us want to risk.

PWG

 

[Tranona]

Tranona you are correct , however the last HMRC VAT lecture I attended threw up a surprise, in that they said member states can now help each other collect if there is not some form of evidence of vat paid.

He cited an example of a hypothetical yacht being boarded by the boarder agency and the issue coming to light as a result of that boarding.

I noted your comment earlier. Suspect that is HMRC "stretching" its powers because it does not seem to have legal powers to do this. Everything that I have read makes it quite clear about the responsibilities of each state, but of course I may have missed something. This would be a major change in EU law.

I guess it depends on the definition of "help" beccause I can imagine some of the cases they deal with are cross border and involve VAT avoidance schemes - not the sort of thing everyday yotties get into!

Despite the report of UKBA demanding proof it is not a legal requirement to have evidence of VAT payment, so all they could do is report the lack to HMRC (if the last transaction took place in the UK) who would presumably then make enquiries if they believe an offence had been committed.

 

[jonic]

I noted your comment earlier. Suspect that is HMRC "stretching" its powers because it does not seem to have legal powers to do this. Everything that I have read makes it quite clear about the responsibilities of each state, but of course I may have missed something. This would be a major change in EU law.

I guess it depends on the definition of "help" beccause I can imagine some of the cases they deal with are cross border and involve VAT avoidance schemes - not the sort of thing everyday yotties get into!

Despite the report of UKBA demanding proof it is not a legal requirement to have evidence of VAT payment, so all they could do is report the lack to HMRC (if the last transaction took place in the UK) who would presumably then make enquiries if they believe an offence had been committed.

I must admit I was a little surprised. I have gone back to check my notes as it was in October, and this is them exactly as I wrote them:

"HMRC now working with UKBA. UK will also collect on behalf of other states and it works in reverse. Bills of sale no longer mean it is just the concern of UK.

You can ask for HMRC to be contacted by another state in order to give a view. Old vat status letters now illegal."

How often this has happened I do not know, but with the boarder agencies it seems to be stepping up a bit.

 

[DJE]

Does all this apply only to boats? It seems to me that plenty of people cross EU borders all the time in privately owned light aircraft - or even cars - either of which can be more valuable than the average cruising yacht. Ever been asked to prove the VAT status of your car at Calais?

 

[macd]

Does all this apply only to boats? It seems to me that plenty of people cross EU borders all the time in privately owned light aircraft - or even cars - either of which can be more valuable than the average cruising yacht. Ever been asked to prove the VAT status of your car at Calais?

Quite!

And, to repeat: very, very few of us have proof of the VAT status of our boats. Evidence, maybe; proof, no.

 

[Tranona]

Does all this apply only to boats? It seems to me that plenty of people cross EU borders all the time in privately owned light aircraft - or even cars - either of which can be more valuable than the average cruising yacht. Ever been asked to prove the VAT status of your car at Calais?

Boats are targetted because in certain sectors there are many more opportunities for a determined person to avoid paying VAT on boats in use in the EU. If you read the VAT notice no 8 there are many ways a boat can gain exemption if it is owned by somebody outside the EU or it is used as a business asset.

Individual private owners are usually not in a position to exploit these exemptions or to claim as a business asset, but on a high value yacht it is attractive to some to arrange their affairs to avoid (or reduce) paying VAT while still enjoying private use. I saw an estimate recently in the house magazine of a major accounting firm that unpaid tax on boats EU wide was up to 2 billion Euros (although it was unclear whether this was the value of the boats or the unpaid VAT). A headline example of this "problem" was the seizing of Flavio Briatore's yacht in Italy. The boat is owned by a Cayman Islands compnay and operates (legally) as a charter boat. The Italian authorities claimed that it was in fact a personal asset and as he is an EU resident is liable to pay VAT on it if he wishes to keep it in the EU. The amount involved was over 1 million Euros. I don't know if it has been resolved yet.

The dilemma tax authorities have is that VAT is not a boat tax - it is a tax on a transaction. So it is the nature of the transaction that determines whether it is taxable, not the nature of the asset. They would prefer it to be otherwise because a tax on an asset is much easier to police than one on transactions. So we get this cat and mouse game where they concentrate on tying it down to the boat, knowing that if there is an irregularity they will have to prove it is not acccounting properly for VAT by a VAT registered person (except in the case of a privately imported boat). Private owners are not VAT registered so by definition in that capacity cannot commit a VAT offence.

 

[cloud7]

vat

thanks for all the posts appreciated