Friends and Family “Informal Charter”

[ylop]

Given the cost of boats at the moment and a desire to add some extra feet of length (with consequent extra storage/maintenance costs) but the reality that a yacht owned by working people spends a lot of time tied up doing nothing, my better half raised an interesting point. People we know with second homes often let these out informally to friends and family, and to friends of friends and so forth. I believe most are not really making a profit doing this but they might be covering the bills and if they have it mortgage interest. They typically are not letting to total strangers, they only let it for time they wouldn’t use it themselves and because it’s a cheap deal / contribution to cost there is less expectation that it feels like a classic holiday cottage - ie some of their personal stuff might be around, the probably haven’t locked stuff like bikes in the garage away separately (they might even lend these) etc. they never advertise these - it’s word of mouth.

so, can you do the same with yachts? My initial answer was no - that will bring you into the land of coding and the extra cost probably outweighs any benefit. I know if say the other users were direct family - say by brother and my cousin that would be ok, provided it’s only covering costs. I think friends are ok? But when is someone a close friend and when are they just an acquaintance? When is a friend of a friend or a friend of a relative not close enough? I realise that who you trust with a cottage and who you trust with your yacht would be totally different - I’m more interested in where the MCGA draws the line especially if anyone has anything tangible rather than just their own opinion to base it on.

 

[greeny]

Given the cost of boats at the moment and a desire to add some extra feet of length (with consequent extra storage/maintenance costs) but the reality that a yacht owned by working people spends a lot of time tied up doing nothing, my better half raised an interesting point. People we know with second homes often let these out informally to friends and family, and to friends of friends and so forth. I believe most are not really making a profit doing this but they might be covering the bills and if they have it mortgage interest. They typically are not letting to total strangers, they only let it for time they wouldn’t use it themselves and because it’s a cheap deal / contribution to cost there is less expectation that it feels like a classic holiday cottage - ie some of their personal stuff might be around, the probably haven’t locked stuff like bikes in the garage away separately (they might even lend these) etc. they never advertise these - it’s word of mouth.

so, can you do the same with yachts? My initial answer was no - that will bring you into the land of coding and the extra cost probably outweighs any benefit. I know if say the other users were direct family - say by brother and my cousin that would be ok, provided it’s only covering costs. I think friends are ok? But when is someone a close friend and when are they just an acquaintance? When is a friend of a friend or a friend of a relative not close enough? I realise that who you trust with a cottage and who you trust with your yacht would be totally different - I’m more interested in where the MCGA draws the line especially if anyone has anything tangible rather than just their own opinion to base it on.

Interesting discussion that may also need to include HMRC 's interests in the transactions that take place. How will they be viewed? Rental income? I don't know the answer but suspect they will want a piece of the action somewhere, or least require it reporting on annual returns. I think to do it "legally" could be a minefield, but much easier if you stay completely under the radar with the associated risks that go with that.

 

[ean_p]

I think that this points out that any 'contribution' has to be for the direct operation of the vessel as it is being used and not for its berthing , purchasing etc etc else it may be considered as used for gain or benefit !

(ii) on a voyage or excursion which is one for which the owner does not receive money
for or in connection with operating the vessel or carrying any person, other than as a
contribution to the direct expenses of the operation of the vessel incurred during the
voyage or excursion;

It sounds like a pro rata 'contribution' towards the diesel and food would be OK and maybe nightly berthing costs.......anything else might well be seen as 'commercial' with all it entails. The tricky bit is that its not just a job for an accountant as it also has 'legal' connotations, ie coding etc. As above ...a minefield!

https://assets.publishing.service.g.../268868/mgn489-amendment-pleasure-vessels.pdf

 

[ylop]

greeny - I'm not worried about having to report to HMRC. There might indeed be some thought required about if this is income, then what legitimate costs can be offset. I assume at least some of the people doing it with second homes are legitimately reporting the income, and HMRC will have guidance on whether letting your brother use your holiday house for 1 week a year means you can offset all of the council tax as a business expense or not. (The answer is probably only if you are an MP or FTSE100 executive!)

I am 100% not interested in doing anything under the radar from either an HMRC or MCGA perspective.

 

[AntarcticPilot]

As I understand it, anything more than direct running costs gets you into the land of coding and tax returns. You can LEND a boat to friends and family (I have done that several times, and even insurance companies are happy with it) but you can't ask them to make a contribution to costs like marina fees, maintenance etc. Of course, if they coincidentally happen to make you a present that is totally unconnected with their use of the boat, that's another matter!

 

[ylop]

ean_p - you might be right, the strict and proper wording of "direct expenses of the operation of the vessel incurred during the
voyage or excursion" does seem to imply that if someone borrows my yacht the costs only apply from when they pick it up to when they return it. I had wrongly remembered it as being the direct expenses of the vessel (which would mean for a 1 week loan at least 1/52 of its annual maintenance and storage etc; arguably say 1/12th if it actually only goes to sea 12 weeks a year).

It would seem that to be really crafty I'd need to set it up as a members club - then offer guest membership! That seems like more hassle than just coding it!!!

AntarticPilot - mmm... I can imagine trying to explain that one away. Did he ever make you gifts before you owned a boat? "no". Did the pattern of gifts coincide with the boat use "Oh, look yes". Did you lend the boat to anyone else, "yes", and did they happen to give you gifts that they had never made before too? "Well, now that you mention it". I'm sure a gift like a bottle of Whisky as a genuine thank you is not going to upset anyone. But 1/12th of the upkeep of a 37ft'er might!

 

[Wansworth]

Unless you need the money don’t get into a minefield and area of unnecessary worry

 

[ylop]

Unless you need the money don’t get into a minefield and area of unnecessary worry

What if it would let you add 3ft (or more importantly 3” headroom!) and a newer boat?

 

[AntarcticPilot]

ean_p - you might be right, the strict and proper wording of "direct expenses of the operation of the vessel incurred during the
voyage or excursion" does seem to imply that if someone borrows my yacht the costs only apply from when they pick it up to when they return it. I had wrongly remembered it as being the direct expenses of the vessel (which would mean for a 1 week loan at least 1/52 of its annual maintenance and storage etc; arguably say 1/12th if it actually only goes to sea 12 weeks a year).

It would seem that to be really crafty I'd need to set it up as a members club - then offer guest membership! That seems like more hassle than just coding it!!!

AntarticPilot - mmm... I can imagine trying to explain that one away. Did he ever make you gifts before you owned a boat? "no". Did the pattern of gifts coincide with the boat use "Oh, look yes". Did you lend the boat to anyone else, "yes", and did they happen to give you gifts that they had never made before too? "Well, now that you mention it". I'm sure a gift like a bottle of Whisky as a genuine thank you is not going to upset anyone. But 1/12th of the upkeep of a 37ft'er might!

I agree that a gift on that scale would be out of the question - and would certainly get you into coding and tax areas if anything went wrong enough to bring it to the attention of the authorities. I was thinking of something much more modest!

 

[Wansworth]

On the one occasion I did something similar I regretted it a few weeks later and cancelled the arrangement

 

[AntarcticPilot]

What if it would let you add 3ft (or more importantly 3” headroom!) and a newer boat?

I think that the bottom line is that if you can't afford it out of your own resources, then it's out of reach. A properly commercial arrangement might work, but then you may have considerable extra expense, which isn't worth it if you're only chartering for a few weeks a year. The only way it would work would be if the boat was jointly owned by you and A.N. Other; arrangements like that do work, but require a degree of give and take between the parties, and a common understanding of the nature of the agreement. They also have the potential for going badly wrong! Examples of both have been aired from time to time on here. Personally, I'd rather have a smaller vessel that is wholly my own to do as I please with.

 

[Lightwave395]

I did it once only, as it suited both parties well

I worked with a guy back in the 90's who chartered every year with 3 of his mates, he was a competent sailor who'd been one of my crew during a trade sponsored Sunsail regatta

We agreed a deal for something less than half the cost of his usual charter

I did Cork week that particular year and at the end of the week, myself and 2 of my crew sailed the boat from Crosshaven back to Falmouth, he drove his car down to Falmouth with his crew and my cruising sails, took over the boat, me and my crew took his car and my racing sails, drove back to Hamble where our cars were and drove ourselves home, he sailed my boat back to Hamble over the ensuing 10 days and everyone was happy. He got a sail in a better boat than he normally chartered and I got a decent contribution to my Cork week costs

 

[ylop]

I think that the bottom line is that if you can't afford it out of your own resources, then it's out of reach.

I think I probably agree - although its never quite as simple as not being able to afford it. Its more about how much you are comfortable spending for the thing you will use for perhaps 4 full weeks, 4 long weekends, 4 normal weekends and half a dozen day sails a year (<60 days?). e.g. if its the purchase price, many people will quite happily borrow to do it; if its the operating cost many would keep it on a mooring rather than a marina, or perhaps a better boat comes at the sacrifice or a ski holiday, or new car. Alternatively, it might be working overtime or both partners working, or not giving as much surplus cash to university age kids, or paying as much into a pension so you can retire slightly earlier etc...

I'm not totally against the idea of shared ownership - but I think that is different from ad hoc arrangements. I wasn't thinking every year exactly the same people would want to use it, exactly the same amount, and I wasn't anticipating asking anyone to make any sort of commitment. I would seriously consider doing it as proper charter and make a little cash - but boat is not on the doorstep so its too much hassle to be in the right place for handovers - people turning up late, leaving the boat a state etc - whereas if its people you know and trust there is less of an issue.

 

[PlanB]

I note that Mr Pilot says his insurance company was happy with a loan arrangement, but somewhere on here I can't find is a discussion about how insurers may require the owner to be onboard. And I know of one couple who had to get married of a means of moving his boat from Scotland to the Med when it was the g/f who was the single handed sailor!

 

[MoodySabre]

A previous thread "Lending" someone your boat in Croatia

I am indeed indebted to Antarticpilot for his generosity and a great week on the Clyde.

 

[AntarcticPilot]

A previous thread "Lending" someone your boat in Croatia

I am indeed indebted to Antarticpilot for his generosity and a great week on the Clyde.

And I checked with my insurers. Basically, as long as it's GENUINE friends or family, with no financial consideration beyond immediate running costs they don't usually have a problem. But they wouldn't cover a commercial arrangement.

 

[ylop]

And I know of one couple who had to get married of a means of moving his boat from Scotland to the Med when it was the g/f who was the single handed sailor!

wow - that could get complicated if I was lending it a lot! polygamy - not sure that's a route to saving money![/quote][/QUOTE]

 

[PhillM]

Simple answer, don’t. Not unless you have the boat MCA coded. It simply isn’t worth the money for what could happen to you if there was an accident. The penalty for running an unofficial charter company are severe.

Now you could setup a boat syndicate with people owning a small share each and contributing to all costs as a percentage of their ownership. That’s perfectly doable and you don’t need the boat to be coded. But do use proper paperwork (the rya have templates).

 

[Spirit (of Glenans)]

As I understand it, anything more than direct running costs gets you into the land of coding and tax returns. You can LEND a boat to friends and family (I have done that several times, and even insurance companies are happy with it) but you can't ask them to make a contribution to costs like marina fees, maintenance etc. Of course, if they coincidentally happen to make you a present that is totally unconnected with their use of the boat, that's another matter!

When I was a child my father owned two cars, which he would hire out, under the radar. His method was to only receive payment when the car was returned. (He was only let down once or twice.) The hirer was told to say, if asked by police, that the car was on loan. The payment on return was officially a "contribution to running costs".
Ironically, most of his customers were young, single Gardai from the local station, who lived in "digs" on our street and went home to the provinces when they had leave.

 

[Birdseye]

Given the cost of boats at the moment and a desire to add some extra feet of length (with consequent extra storage/maintenance costs) but the reality that a yacht owned by working people spends a lot of time tied up doing nothing, my better half raised an interesting point. People we know with second homes often let these out informally to friends and family, and to friends of friends and so forth. I believe most are not really making a profit doing this but they might be covering the bills and if they have it mortgage interest. They typically are not letting to total strangers, they only let it for time they wouldn’t use it themselves and because it’s a cheap deal / contribution to cost there is less expectation that it feels like a classic holiday cottage - ie some of their personal stuff might be around, the probably haven’t locked stuff like bikes in the garage away separately (they might even lend these) etc. they never advertise these - it’s word of mouth.

so, can you do the same with yachts? My initial answer was no - that will bring you into the land of coding and the extra cost probably outweighs any benefit. I know if say the other users were direct family - say by brother and my cousin that would be ok, provided it’s only covering costs. I think friends are ok? But when is someone a close friend and when are they just an acquaintance? When is a friend of a friend or a friend of a relative not close enough? I realise that who you trust with a cottage and who you trust with your yacht would be totally different - I’m more interested in where the MCGA draws the line especially if anyone has anything tangible rather than just their own opinion to base it on.

Interesting question. I have no doubt that the large majority of casual second home lets arent entered into any tax return so why would you worry about the MRCA and coding? You are only likely to be checked in the event of an accident.

But an accident is the more serious issue. Just suppose a pal and his kid hire your boat, the kid gets brain damage from the boom and the resulting investigation reveals the coding issue and lack of the correct kit? Insurance company says "go away" and you face a multi million claim. Unlikely event but very serious consequences.

Better to have a sensible sized boat, a cheap mooring , and a good nights sleep.