First Boat Advice Please (and VAT)

[Nick_H]

Yes, because the VAT from the original invoice might have been reclaimed and then not correctly accounted for when the boat was subsequently sold. In that case the original invoice is worthless. You need to see the invoice for the sale from the VAT registered business to a private individual.

I thought that if the VAT registered company had not correctly accounted for VAT on the sale, then the risk did not pass to the buyer, even if the company later became insolvent and/or was shown to have acted fraudulently?

I agree that for pragmatic reasons it's always best to have a copy of all the VAT receipts in the chain, but your original point was that you don't actually need a copy unless the boat has been outside the EU or has been owned by a VAT registered company. I still don't see why the second of these increases the risk.

 

[Talulah]

From previous threads written a while back by some actual experts on here, not just arm chair lawyers and if my memory serves correct the situation is as follows:

The number one principle is that VAT is a tax on transactions.
The VAT is payable on the transaction by the company selling the goods. If VAT is due but unpaid the HMRC can go after the business but not after the goods sold. The risk does not pass to the buyer.
There is one exception. Goods imported. VAT is due on goods at the first point of entry into the EU. In this instance where VAT is due and has not been paid then the HMRC can go after the goods.

For an individual buying a second hand boat off a company that company will charge VAT and a new VAT invoice issued. This could be the case for example where a company originally bought a boat, claimed back the VAT (or not) and now years later is selling the boat whilst still VAT registered. If the company ceased to be VAT registered than no VAT would be payable and no new VAT invoice would be issued.
For an individual buying a boat off a private individual (including where a broker is involved), then no new VAT invoice will be issued (and often the original is produced).
If no original VAT invoice is provided then prove must be provided that the boat has not just been imported but used in EU waters. Otherwise this is the only situation where HMRC could come after the boat. (Think of boat imported from Channel Islands but seller pretends it has always been here.)

The problem of course is the perceived problems. Try explaning the above in a foreign language to an official who doesn't have a grasp of VAT law. Hence in practice the original VAT invoice makes things a lot easier but isn't necessary in law. Meanwhile your boat is impounded whilst they sort it out.

One other thing to watch for. If VAT has been paid but the boat has then subsequently been out of EU waters for 3 years (I could be wrong on number of years) then VAT is payable again on import.
Think of boat where the owners have gone world cruising for a number of years and then come back and sell the boat. VAT would have been due on import.

 

[AdeOlly]

Another Jeanneau 34 (2005) - I'm now wondering if she will be too small for weekends away with the Mrs and 2 boys

We have a Prestige 34 HT and two youngsters aged 8 and 6. We find the boat perfectly big enough for the four of us, though the small heads is a bit of a PITA. Jeanneau have made really good use of the space (those flared bows help push the accomodation forward) and the cockpit is superbly set out and spacious.

The Bavaria 37 is much bigger, I think it's well over 39' LOA from memory whereas the Prestige is 34' 6") and those 5' make a considerable difference, plus it has more beam too. It's big for a first boat IMO, esp on outdrives, but you no doubt have training planned. If you have teenage kids with loads of stuff it would be a better choice from a space point of view.

The S37 is a nice boat too, but it's a soft top so inferior to the other two for use in the UK IMO (ducks, dons tin hat and runs for cover). Being older not an issue provided its been looked after properly, especially the outdrives.

As to the VAT invoice, I wouldn't buy without for no other reason that it'll give you hassle when you come to sell.

 

[SailorBill]

There is no evidence that this happens.

Yes there is. Read the first paragraph of post 7.

If the transaction took place in the UK it is of no interest to any other state. The only time they would be interested is if there was evidence that the boat had been imported from outside the EU.

Try telling that to officials from another EU country who ask for proof that VAT has been paid. Try having your argument with them in their language!

Please explain how it is possible for a private individual to pay VAT "separately" on a boat he bought privately from another EU resident.

Is that a trick question? You pay HMRC in the same way you would if you were importing a boat into the EU.

 

[DAKA]

One other thing to watch for. If VAT has been paid but the boat has then subsequently been out of EU waters for 3 years (I could be wrong on number of years) then VAT is payable again on import.
Think of boat where the owners have gone world cruising for a number of years and then come back and sell the boat. VAT would have been due on import.

You are not exactly wrong on the number of years being 3 but a little extra clarification perhaps, there isnt actually a specified time so technically if you take your boat out of EU waters then VAT is due again, that is why it is essential to complete C1331 form before you go on holiday to make it clear you are on holiday and not exporting, the good news is HMR&C feel they are being generous in allowing you 3 years to change your mind and come back before they enforce the second VAT charge (? import duty? but its the same 20%).

If anyone does go on a World cruise for over 3 years they should contact HMR&C as extensions are possible for genuine world cruises.


The extra risk in buying a boat that includes a VAT reg company is that the VAT will almost certainly have been claimed back but the VAT reg company dont always have to charge VAT on the sale, for example if the if the boat is sold outside the EU and is not intended to be sailed into an EU country(exchanged in Channel Islands for example).

 

[mainshiptom]

Buying with a VAT

If I was told a boat has vat invoice and when comes to it it does not I would offer 20% less to complete the sell and leave the seller to get on with it !


Tom

 

[jrudge]

+1

 

[Tranona]

I thought that if the VAT registered company had not correctly accounted for VAT on the sale, then the risk did not pass to the buyer, even if the company later became insolvent and/or was shown to have acted fraudulently?

I agree that for pragmatic reasons it's always best to have a copy of all the VAT receipts in the chain, but your original point was that you don't actually need a copy unless the boat has been outside the EU or has been owned by a VAT registered company. I still don't see why the second of these increases the risk.

You are correct in that the liability is with the vendor. The point about differentiating between private transactions and those involving VAT traders is that they are not VAT able transactions. So if a boat has always been owned by private people then the original VAT invoice is the evidence that VAT has been accounted for. If, on the other hand the boat has been traded by VAT registered entities, then the original invoice is not sufficient evidence as there may have been a further VAT transaction involving the boat - and the invoice for that is the evidence.

 

[Andymap]

Hi All

Thanks for your advices on this.

The boat has always been owned privately and has never (to my knowledge) been out of the UK.

I know the vendors are doing all they can to find the original invoice but it seems a lost cause hence the question re Bavaria; Sealine etc.

Cheers.

 

[Tranona]

Yes there is. Read the first paragraph of post 7.


Try telling that to officials from another EU country who ask for proof that VAT has been paid. Try having your argument with them in their language!


Is that a trick question? You pay HMRC in the same way you would if you were importing a boat into the EU.

So, what did the nice French customs person do? Just be nice. If the Bill of Sale says the transaction took place in the UK then it is the UK HMRC responsibility. This topic goes round and round, and there is never any evidence that anybody has had their boat impounded or been required to pay VAT unless an offence has been committed. Not having a VAT invoice is not an offence. The only people who can commit VAT offences are VAT registered entities with the sole exception of an individual who imports a boat from outside the EU.

You cannot pay HMRC "in the same way as if you were importing". You can only do it if you ARE importing. So you would have to show that you purchased the boat outside the EU, pay duty (if appropriate), pay VAT and get the boat CE marked. If you have not bought the boat outside the EU, there is no legal requirement, nor mechanism to pay VAT.

So, No. No trick question - just what you suggest is impossible.

 

[Nick_H]

You are correct in that the liability is with the vendor. The point about differentiating between private transactions and those involving VAT traders is that they are not VAT able transactions. So if a boat has always been owned by private people then the original VAT invoice is the evidence that VAT has been accounted for. If, on the other hand the boat has been traded by VAT registered entities, then the original invoice is not sufficient evidence as there may have been a further VAT transaction involving the boat - and the invoice for that is the evidence.

OK, I see your point, although of course individuals can be VAT registered, and private individuals who are not VAT registered can still export boats. However, in a situation where there's no such thing as absolute proof, and the aim is to mitigate the risk from small to negligible, I can see that a VAT invoice to an individual is a worthwhile piece of evidence, and conversely, ownership by a VAT registered company suggests a bit more diligence is needed.

 

[Tranona]

OK, I see your point, although of course individuals can be VAT registered,

Yes, but the important point is that the VAT registered entity must have owned the boat as a business asset. I was (like many self employed) VAT registered as an individual for my business, but my boat was not owned by my business but by me personally. There are different scenarios that can exist which is why you need to know the facts of the specific transaction. The VAT "status" (for want of a better word) of a boat can change during its existence depending on the nature of transactions it was involved in.

Fortunately for most boats and people there are not issues, but anything in the history that suggests "company" ownership, or periods of time outside the EU means extra diligence.

 

[Talulah]

Fortunately for most boats and people there are not issues, but anything in the history that suggests "company" ownership...

As VAT returns are not tied to boats and their invoices I don't think there is much extra diligence to be done. Open to suggestions though.

 

[SailorBill]

So, what did the nice French customs person do?

Ask jrudge. In post 7 he said:

not so sure about that. If you get boarded and asked for a VAT receipt ( it has happened to me in France - they were charming) and you cant produce one I rather suspect it has just become your problem.

The fact is, foreign officials do sometimes ask for proof of VAT being paid (jrudge's example is not the first time I have heard of VAT receipts being asked for by foreign officials). If you don't have the requested proof then you could find yourself trying to resolve an official problem in a foreign language. That's not a situation I would want to voluntarily put myself in so for peace of mind I will never buy a boat without proof of VAT being paid if I intend to take it outside UK waters. I am not alone in my stance on this. Therefore the potential resale value and potential market are reduced for any boat without proof of VAT being paid. I do not see any advantages to buying a boat that supposedly has had VAT paid on it but does not have supporting proof. All I see are pitfalls and problems for the unwary.

 

[Tranona]

Ask jrudge. In post 7 he said:



The fact is, foreign officials do sometimes ask for proof of VAT being paid (jrudge's example is not the first time I have heard of VAT receipts being asked for by foreign officials). If you don't have the requested proof then you could find yourself trying to resolve an official problem in a foreign language. That's not a situation I would want to voluntarily put myself in so for peace of mind I will never buy a boat without proof of VAT being paid if I intend to take it outside UK waters. I am not alone in my stance on this. Therefore the potential resale value and potential market are reduced for any boat without proof of VAT being paid. I do not see any advantages to buying a boat that supposedly has had VAT paid on it but does not have supporting proof. All I see are pitfalls and problems for the unwary.

That "problem" has been vastly overstated. The RYA has run a survey and is unable to find any reliable reports of people having difficulties. If you follow this subject on the Liveaboard forum you will find time and time again people who travel widely in Europe NEVER get asked for proof of VAT. On the rare occasions you hear about it it is because there is something unusual. Clearly, for example customs are more vigilant in areas where the EU buts up against non EU as smuggling is more likely.

However for most of us it is a non-event. Provided you have your registration document and proof that the boat was bought in the UK, nobody will be interested. This is the advice given by HMRC to UK boat owners going abroad. The only people who are concerned about VAT evidence are finance houses and as a result it has got into the boat buyer psyche that it is an important document.

Like you I would be wary of buying a high value boat from a private person without a VAT invoice, but only because it might create difficulties selling it, NOT because there is any possibility of an offence or being required to pay VAT because there is no offence, no liability nor any mechanism for payment.

So, while people believe there is a problem when in fact there is not means it is a self perpetuating myth that harms us all by affecting the value of our assets for no logical reason.

 

[P4Paul]

out of interest, what happens if a boat has been chartered by an individual and a partial VAT refund has been received. Does the individual then have to repay the VAT upon reselling; how is that proved?

Or am I off-beam and the boat would have been owned by a VAT registered 'charter company' to access the VAT refund in the first place?

 

[SailorBill]

That "problem" has been vastly overstated. The RYA has run a survey and is unable to find any reliable reports of people having difficulties. If you follow this subject on the Liveaboard forum you will find time and time again people who travel widely in Europe NEVER get asked for proof of VAT. On the rare occasions you hear about it it is because there is something unusual. Clearly, for example customs are more vigilant in areas where the EU buts up against non EU as smuggling is more likely.

However for most of us it is a non-event. Provided you have your registration document and proof that the boat was bought in the UK, nobody will be interested. This is the advice given by HMRC to UK boat owners going abroad. The only people who are concerned about VAT evidence are finance houses and as a result it has got into the boat buyer psyche that it is an important document.

Like you I would be wary of buying a high value boat from a private person without a VAT invoice, but only because it might create difficulties selling it, NOT because there is any possibility of an offence or being required to pay VAT because there is no offence, no liability nor any mechanism for payment.

So, while people believe there is a problem when in fact there is not means it is a self perpetuating myth that harms us all by affecting the value of our assets for no logical reason.

I believe you are understating the problem but we seem to be going round in circles so perhaps it's best if we leave it there.

 

[Tranona]

out of interest, what happens if a boat has been chartered by an individual and a partial VAT refund has been received. Does the individual then have to repay the VAT upon reselling; how is that proved?

Or am I off-beam and the boat would have been owned by a VAT registered 'charter company' to access the VAT refund in the first place?

Not sure what you mean by a partial refund of VAT. Normally if a boat is purchased as a business asset, and the business is charter then the VAT is reclaimed as an input tax. When the boat is sold, the seller has to account for VAT on that transaction. So, if the boat was originally £100k +VAT the company would have reclaimed the VAT. If the boat was sold for say, £60k it would then charge 20% VAT or £12k making a total price of £72k. A private buyer would not be able to reclaim that, but if it was sold to another VAT registered business they may be able to reclaim if it was a business asset.

 

[Tranona]

I believe you are understating the problem but we seem to be going round in circles so perhaps it's best if we leave it there.

Not understating - just reflecting the advice given by HMRC on the subject.

 

[jrudge]

Can you explain what the "problem" might be?

We when the customs team board and am for stuff you give it to them. They wanted our passports, boat registration and vat receipt. They spoke faultless English and when I offered to wakeup the wife and kids who were having a snooze said no no no.

What would happen if I did not have what they asked for? No idea, but I assue something or they would not ask!

There are plenty of boats with the right paperwork. Why have te hassle?