First Boat Advice Please (and VAT)

[Tranona]

From the HMRC website: http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000289&propertyType=document#P155_19668

Section 4.2 :



And in the last paragraph :

However, that is not the law. That is only reflecting the intention of the EU directive. Did not make it into law as there is no way of enforcing it because there is no way in UK law of establishing a record of VAT paid - only the invoice that is an indication that a VAT transaction occurred sometime in the past. Even then the invoice may not have sufficient detail to tie it to the boat in question, and it does not necessarily indicate that the VAT has accounted for correctly to customs!

As I (and others) have said many times VAT on boats is ill conceived. VAT is a transaction tax, not an asset tax, and is therefore not tied to the asset - however much customs might like it to be. Therefore any disputes arise from the transaction, not the existence of the asset. This is precisely why the advice from HMRC is written to reflect the importance of the nature of the transactions which involve the boat - because that determines whether VAT is due. Just as an example if you did pay VAT direct to customs on an imported boat, they would issue a receipt showing it has been paid, but do not keep a copy, so would be unable to confirm in the future that any payment had been made. That receipt is the only record, and there is no legal requirement to keep it - only a recommendation.

This is not necessarily the case in other states where, for example registration of boats is compulsory and evidence of correct payment of VAT is a condition of registration. But that does not affect a boat bought in the UK, even if it is used in another state. The law that matters is the one that governed the transaction, that is UK law.

 

[Tranona]

Further to my previous post #98, from the same HMRC document :



Evidence might be what - lack of a VAT receipt perhaps?

That might be - but there would have been a VAT invoice (unless the boat was exported), but it would have been to the finance company. The lease schemes are complex, and in some states are acceptable, indeed are encouraged. In the UK they are generally illegal, so any arrangement that uses a lease will attract attention.

This, once again is very different from somebody who has legally bought a used boat from a UK resident, which is not a chargeable event, so no VAT is involved. If there is any VAT offence it is not with the current owner, nor indeed the previous owner (unless it was a privately imported boat) but by a VAT registered entity sometime in the past.

So, you will see how unworkable the intentions of the directive are. The reality is that the VAT regime has been in operation for many years and has not resulted in mass impounding of boats or demands for payment of tax just because you don't have a receipt. But, of course with potentially highly complex legislation and large sums of money involved there will be irregularities that result in problems for some who seek to avoid the tax. Just don't confuse that with ordinary, straightforward transactions.

 

[SailorBill]

Unbelievable!!!

Tranona, first you don't accept that VAT receipts are asked for by foreign officials, then when given an example in post #7 you (eventually) say that "the problem has been vastly overstated" (#35). When I suggest you are understating the problem you reply in post #39 with "Not understating - just reflecting the advice given by HMRC on the subject." I'll come back to the HMRC advice you were reflecting...

An example of a boat being impounded for VAT irregularities was then given in post #65. We don't know if VAT was then paid or if proof of VAT previously being paid was provided, but we do know the boat was not released for several months because of a VAT issue. But still you try to deny the facts by saying in post #76 that "You (nor anybody else) knows the FACTS surrounding any seizure so just because you heard third hand that a boat was seized means absolutely nothing. There would be a perfectly valid reason why it had been seized." Like no proof of VAT being paid? Oh yes, in post #80.

But still you try to argue against everything you have read and you have the audacity to tell me to "stick to the facts"!!! (#96) and then say "If you don't know what they are, don't guess, but read the two sources HMRC VAT notice No8 and the RYA/HMRC FAQ sheet". I then quote two extracts from HMRC VAT Notice 8 in posts #98 and #100 which clearly set out the situation with regard to the need for proof of VAT being paid and the consequences for not having it. Your response to this HMRC notice (the one that you referred me to, remember?) is "However, that is not the law. That is only reflecting the intention of the EU directive." !!! (#101) and "...how unworkable the intentions of the directive are" (#102) !!!

Tranona, you discount any evidence presented to you and contradict yourself by telling me to stick to the facts and refer me to HMRC VAT notice 8. When I quote from it you then attempt to discount that too. Like I said......

Unbelievable!!!

Your position seems to be so entrenched that you are incapable of seeing things any other way. Either that or you are an argumentative troll. I suggest you take some time to reflect on your posts in this thread because you are making yourself look like a fool.

 

[DAKA]

reflect on your posts in this thread because you are making yourself look like a fool.

Hi SailorBill,
I understand your frustration having argued myself for days in the past with Tranona but I can assure you he is neither a troll or a fool.

He is very knowledgeable which can cause a problem in that sometimes the absolute letter of the law isnt applicable because the enforcement agencies make their own interpretations (sometimes incorrectly) .

Tranona is using a mix of actual law, HMR&C advice which appears to contradict some aspects of the actual law and some expectation of 'usual reality'

It is a reasonable mix of the three disciplines.

You and I share a very similar mix of the three disciplines however our mix is somewhat different to Tranonas.

That is because we all have different attitudes to risk depending on our circumstances.

Some will buy a boat and be able to afford either legal costs of £10-£20 k to defend a prosecution or have a spare 20% of their boat to hand across and shrug their shoulders.

Others will have that cash ear marked for another use.


In a nut shell, none of us are wrong, no one is trolling, we have managed to more or less agree on the overall problem, the only petty bit left is how we individually perceive the risk and there is no way any of us are going to change each others perception of that.


conclusion.........

out of the contributors on this thread we see Tranona and a few others happy to buy a boat at almost full value without comprehensive VAT documentation.*

Others who wouldnt touch it unless at least 20% has been knocked off.

As such the value of a boat without comprehensive VAT proof* is actually worth somewhere between 80% to 90% full value.

In my opinion we may as well agree to disagree (slightly) or the overall message is lost and no one can follow the thread through the bickering.



*Original VAT invoice
Complete transaction history so any VAT reg companies can be identified
second VAT receipts as required
EU berthing history

 

[Nautibusiness]

Brilliantly funny thread.

But, with obviously a serious twist.

I've been really enjoying this one, thanks Andy for starting it.


As is very apparent, there are very different viewpoints as to whether there is a real, perceived or no risk.
Each to their own!

Personally, once again, there are enough boats out there to choose from so why the hell would anyone even entertain "it" whatever "it" maybe in the first place.

Brilliant. Please carry on.

 

[DAKA]

Brilliantly funny thread.

How can you spot the funny wind up ones ?
I havent got the knack of being able to tell which ones are meant to be ironic and which are the serious ones .

Gets me in all sorts of pickles, one forum member hasnt spoken to me for over a week now .

 

[Nautibusiness]

How can you spot the funny wind up ones ?
I havent got the knack of being able to tell which ones are meant to be ironic and which are the serious ones .

Gets me in all sorts of pickles, one forum member hasnt spoken to me for over a week now .

It isn't a wind up thread, it's potentially a very worrying issue for the OP.
But the outcome and 11 pages so far is brilliantly funny.

 

[Imperial One]

Just seen this thread and I have NOT read all the pages but from the first post alone I bet the Finance House is Lombard.
They seem to be using some issue with VAT receipts on any potential deal they do - or rather seemingly are trying NOT to do.
On one recent sale with them involved, even though we had an original VAT receipt and it had been accepted in France, Belgium, Holland and here in the UK before, they were not sure they could accept it.
I mailed copies to the VAT office in Portsmouth and they said on the phone the papers were OK and would be acceptable to them if the boat were ever inspected but they are no longer allowed to write and say so.
In the end, Lombard won the day and lent the money less the potential VAT payable if ever the papers were found to be lacking - yes, the same papers the VAT office said were OK. Now that is UNBELIEVABLE!!

 

[Tranona]

Your position seems to be so entrenched that you are incapable of seeing things any other way. Either that or you are an argumentative troll. I suggest you take some time to reflect on your posts in this thread because you are making yourself look like a fool.

I am not a troll, nor a fool, nor do I have an "entrenched" position. I am just telling you how it is.

Suggest you look in the mirror and ask why you should be taken seriously when you think you can walk into the HMRC and pay VAT when there is no legal requirement to do so.

If you produce evidence that somebody has been fined or suffered any other penalty simply because they do not have a VAT receipt related to their boat, I will withdraw everything I have written.

You seem simply unable to understand the nature of VAT and how it works, because if you did, you would have no difficulty in understanding what I say.

So, to repeat. If you buy a used boat from a private individual in the UK, there is no VAT involved. You cannot commit an offence, and nobody can take any action against you just because there is no VAT receipt.

This does not mean that there are not a whole raft of offences that can be committed in relation to VAT and boats, just as there are with VAT and any other goods - but absence of a VAT invoice is not one of them. With the sole exception of transactions related to the private import of boats, private individuals are not in a position to commit a VAT offence. All other offences are committed by VAT registered entities.

The negative aspect of all this is that the myths which surround the subject cause unnecessary grief to a small number of people. The issue that started this thread is one of them. The current owner of the boat in question has lost the VAT invoice related to the purchase of the boat from the dealer. That is not illegal - there is no obligation to keep it. Assuming he has legal title to the boat he can legally sell it to anybody he likes without any constraints or paying any taxes. However, his ability to sell is being compromised because potential buyers will have difficulty in raising secure finance against the boat. He may well suffer a direct financial loss as a result. The potential buyer loses because his finance company is imposing an unreasonable condition on the loan - even though they will be able to register a charge against the boat.

How can this be right? HMRC acknowledge that many boats do not have a VAT invoice related to them and that they can do nothing about it. They do not pursue people for not having one because it is not an offence. And yet a finance company can use it as a condition which compromises the free and legal buying and selling of private assets.

As to your other concern about "foreign" officials. Of course they can ask to see the document, but its absence is not an offence anywhere. Lack of the document may be an indication that an offence has been committed, but that can only arise from a transaction involving the boat. So if the last transaction was a legal purchase that was not a chargeable event, there is no offence. Even if it was a chargeable event such as a purchase from a VAT registered entity, any offence would have been committed by that entity (that is the seller) rather than the buyer. If that transaction took place in the UK then it is HMRC responsibility and the other state has no jurisdiction.

So in the case of my boat any VAT issues come under Greek jurisdiction, even though I am UK resident and the boat is physically in the UK. If I sell it to a private person in the UK, that will not be a chargeable event, but any VAT issues will then come under HMRC because the last transaction took place in the UK.

I have deliberately confined the explanations to simple transactions because that is what concerns most private boat owners. If you go into the realms of leasing arrangements, cross border transactions, commercial operations, imported boats etc then this simple explanation is no longer sufficient, and you will find that the "problems" that arise with VAT and boats are because the transaction was not of the simple type I have described.

In a sense it is similar to income tax problems, where if your tax affairs are simple and dealt with through PAYE you rarely have problems (apart perhaps from administrative incompetence), but as soon as you get into a situation where you can take advantage of allowances then the possibility of breaking the law rises. Just yesterday HMRC reported that they have 47000 tax avoidance schemes under investigation. These have nothing to do with the millions of people who comply with the law, in just the same way as the difficulties some boat owners have with their VAT avoidance schemes have no connection with you or I, or the tens of thousands of ordinary people who legally own private pleasure boats.

Sorry for the long explanation, but just hope that it helps dispel the myth. If you still want to believe in the myth, then it does not bother me - just don't shoot the messenger.

 

[DAKA]

I am not a troll, nor a fool, nor do I have an "entrenched" position. I am just telling you how it is.

Suggest you look in the mirror and ask why you should be taken seriously when you think you can walk into the HMRC and pay VAT when there is no legal requirement to do so.

If you produce evidence that somebody has been fined or suffered any other penalty simply because they do not have a VAT receipt related to their boat, I will withdraw everything I have written.

You seem simply unable to understand the nature of VAT and how it works, because if you did, you would have no difficulty in understanding what I say.

So, to repeat. If you buy a used boat from a private individual in the UK, there is no VAT involved. You cannot commit an offence, and nobody can take any action against you just because there is no VAT receipt.

This does not mean that there are not a whole raft of offences that can be committed in relation to VAT and boats, just as there are with VAT and any other goods - but absence of a VAT invoice is not one of them. With the sole exception of transactions related to the private import of boats, private individuals are not in a position to commit a VAT offence. All other offences are committed by VAT registered entities.

The negative aspect of all this is that the myths which surround the subject cause unnecessary grief to a small number of people. The issue that started this thread is one of them. The current owner of the boat in question has lost the VAT invoice related to the purchase of the boat from the dealer. That is not illegal - there is no obligation to keep it. Assuming he has legal title to the boat he can legally sell it to anybody he likes without any constraints or paying any taxes. However, his ability to sell is being compromised because potential buyers will have difficulty in raising secure finance against the boat. He may well suffer a direct financial loss as a result. The potential buyer loses because his finance company is imposing an unreasonable condition on the loan - even though they will be able to register a charge against the boat.

How can this be right? HMRC acknowledge that many boats do not have a VAT invoice related to them and that they can do nothing about it. They do not pursue people for not having one because it is not an offence. And yet a finance company can use it as a condition which compromises the free and legal buying and selling of private assets.

As to your other concern about "foreign" officials. Of course they can ask to see the document, but its absence is not an offence anywhere. Lack of the document may be an indication that an offence has been committed, but that can only arise from a transaction involving the boat. So if the last transaction was a legal purchase that was not a chargeable event, there is no offence. Even if it was a chargeable event such as a purchase from a VAT registered entity, any offence would have been committed by that entity (that is the seller) rather than the buyer. If that transaction took place in the UK then it is HMRC responsibility and the other state has no jurisdiction.

So in the case of my boat any VAT issues come under Greek jurisdiction, even though I am UK resident and the boat is physically in the UK. If I sell it to a private person in the UK, that will not be a chargeable event, but any VAT issues will then come under HMRC because the last transaction took place in the UK.

I have deliberately confined the explanations to simple transactions because that is what concerns most private boat owners. If you go into the realms of leasing arrangements, cross border transactions, commercial operations, imported boats etc then this simple explanation is no longer sufficient, and you will find that the "problems" that arise with VAT and boats are because the transaction was not of the simple type I have described.

In a sense it is similar to income tax problems, where if your tax affairs are simple and dealt with through PAYE you rarely have problems (apart perhaps from administrative incompetence), but as soon as you get into a situation where you can take advantage of allowances then the possibility of breaking the law rises. Just yesterday HMRC reported that they have 47000 tax avoidance schemes under investigation. These have nothing to do with the millions of people who comply with the law, in just the same way as the difficulties some boat owners have with their VAT avoidance schemes have no connection with you or I, or the tens of thousands of ordinary people who legally own private pleasure boats.

Sorry for the long explanation, but just hope that it helps dispel the myth. If you still want to believe in the myth, then it does not bother me - just don't shoot the messenger.

Dare I pose one extra question please that appears to have been missed in your summary.........

Although you correctly say an individual that doesnt commit a VAT fraud or Import fraud cant be prosecuted by HMR&C (which is a huge relief) am I right in believing that a VAT debt can be attached to my boat from a previous owner.

A 5 year old second hand boat I m buying might be worth say £200 000 but the HMR&C have in effect got a charge on it to the value of £80 000 ?
And could theoretically sell it to recover their £80 000 leaving me with £120k and a third party to chase for my loss.

NB
£80k being the VAT that was due on import/VAT scam several years previous to my ownership when the boat was newer and more valuable.

 

[Jim@sea]

Without reading 10 pages, The importers must have records. All businesses have to keep records for 6 years and documents for a 2007 boat should still be available.

 

[Nautibusiness]

Without reading 10 pages, The importers must have records. All businesses have to keep records for 6 years and documents for a 2007 boat should still be available.

Hi Jim

Gone bust and the administrators refusing to assist...

 

[beejay190]

Andymap.

Havent had time to follow this thread all the way through. Just wondered if you have decided which boat to go for.

BTW i bought my current boat (Bav29) via Nautibusiness in June 2010 . Original VAT documentation was missing but he managed to get copy certified by the company that
originally supplied the boat.

 

[Nautibusiness]

Andymap.

Havent had time to follow this thread all the way through. Just wondered if you have decided which boat to go for.

BTW i bought my current boat (Bav29) via Nautibusiness in June 2010 . Original VAT documentation was missing but he managed to get copy certified by the company that
originally supplied the boat.

Hiya Beejay!


How is Bobby going?
I do have a vested interest in helping Andy in one way or another, but I am not selling the Prestige 34 he likes.
We may not hear from him for a few days as he is in New York, but I know he really wants to get this right and have no worries regardless of nonsense or not.

 

[beejay190]

Hi Tom.
BOBBY is fine - well there is usually something wrong but "thats boats".
Made my first Channel crossing this year with Kevin B as my crew! Four day trip to St Helier
and St Peter Port. Great experience and i learnt alot.
Bav is currently out of the water and i am busy scrapping off barnacles and applying AF. Life was so much simpler with a bowrider.
Best
Bob

 

[Quest]

Andymap,

Is there an update for here Andy did you buy the boat or was the VAT issue a showstopper?

Andrew

 

[Nautibusiness]

I have just heard back from Andy and Lombard have found the necessary paperwork for his planned purchase.

Dissapointing for me as I have the lovely Bavaria 37 on my books (which has a perfect paperwork and service history trail) :-(

But, I wish Andy every success with the '34 as they are lovely boats too. I am sure he'll have an amazing time with her. Good luck Andy!

 

[Quest]

Nautibusiness,

Thanks for the update. Congratulations to Andy.

Andrew

 

[beejay190]

I have just heard back from Andy and Lombard have found the necessary paperwork for his planned purchase.

Dissapointing for me as I have the lovely Bavaria 37 on my books (which has a perfect paperwork and service history trail) :-(

But, I wish Andy every success with the '34 as they are lovely boats too. I am sure he'll have an amazing time with her. Good luck Andy!

And the owners of the Bav37 have already bought their next boat so could be a deal to be done there. Not for me tho, if iever change my next boat is going to have a roof !

 

[Nautibusiness]

And the owners of the Bav37 have already bought their next boat so could be a deal to be done there. Not for me tho, if iever change my next boat is going to have a roof !

Haha
...I may have the perfect thing for you... watch this space.