Help on VAT

Mavis

Mavis

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I am sure this has been covered but a search on vat does not throw anything up. The question is this:
Your boat was built and purchased new (1987) in the UK so VAT would (must) have been paid by the original buyer. Over the years, and after changing hands several times the important piece of paper proving that VAT was paid has vanished. So as you have no proof you are expected to pay VAT when you come to sell it. Why is this, and how can it be overcome ??
Thanks.
 
Absolutely nothing to worry about - you are in the same position as thousand of others.

VAT is a tax on a transaction, not a boat. Transactions between private citizens do not involve VAT. Only in transactions where the seller is VAT registered trader does the seller have to account for VAT (and then only if he is selling by way of trade, not if it is his personal property).

When you come to sell, a buyer may query the lack of evidence although there is no reason in law why you should have any evidence.

From time to time there is some concern that "foreign" authorities may demand evidence if you are in their territory, but the reality is that it does not happen very often. Even if it does then if you have your Bill of Sale showing you bought it in the UK then any VAT issues are the responsibility of UK HMRC - who in turn are not interested.

The only way a private individual is liable for VAT is if he imported a boat into the EU. Clearly in this case it makes sense to keep the receipt from HMRC!

You will find if you look on the RYA site at their information on VAT that HMRC advise that they will only accept an "original" receipt as evidence of payment. What they don't tell you is that they only require evidence if they believe an offence has been committed. As it is impossible for an individual to commit an offence in relation to VAT (except if he is the importer) there is no reason why they should ask you for proof.

BTW this subject comes up regularly, usually resulting in a long thread, which comes to a conclusion very much like this post!
 
Thanks Tranona

It is my broker who is advertising my boat for me and he says that I have to pay VAT. So I suppose he is a VAT registered trader. Does that make a difference ??
 
Tranona said:
You will find if you look on the RYA site at their information on VAT that HMRC advise that they will only accept an "original" receipt as evidence of payment. What they don't tell you is that they only require evidence if they believe an offence has been committed. As it is impossible for an individual to commit an offence in relation to VAT (except if he is the importer) there is no reason why they should ask you for proof.
Click to expand...

Might they ask for proof that the current owner did not import the boat?
 
Assume Vat hasn't been Paid

peterkinver said:
I am sure this has been covered but a search on vat does not throw anything up. The question is this:
Your boat was built and purchased new (1987) in the UK so VAT would (must) have been paid by the original buyer. Over the years, and after changing hands several times the important piece of paper proving that VAT was paid has vanished. So as you have no proof you are expected to pay VAT when you come to sell it. Why is this, and how can it be overcome ??
Thanks.
Click to expand...
If you do not have proof of Vat paid then If you leave the UK then return then HMRC may require Proof of vat paid, Vat isn't automatically paid The boat may have been purchased by a Buisness and used for Buisness use, then passed onto another buisness use then mayby exported, then returned as a Buisness tool, who Knows, If you do not have proof of VAT you may be the one to become liable, wether you pay the vat or not count it in as a potential cost as you would any other Problems that may occur,
 
peterkinver said:
It is my broker who is advertising my boat for me and he says that I have to pay VAT. So I suppose he is a VAT registered trader. Does that make a difference ??
Click to expand...
As Skysail says you have to pay VAT on his services if he is VAT registered. He has no financial interest in your boat. The contract will be between you and the buyer as private citizens so VAT does not come into it. The Bill of Sale wil say that you sell it free of any encumberances so the buyer knows he has clear title.
 
orbister said:
Might they ask for proof that the current owner did not import the boat?
Click to expand...

They may if they have suspicions that a boat has been illegally imported, but you will have a Bill of Sale that shows you bought it privately - or if you bought it from a registered trader a VAT invoice as well.
 
Brian blue bear said:
If you do not have proof of Vat paid then If you leave the UK then return then HMRC may require Proof of vat paid, Vat isn't automatically paid The boat may have been purchased by a Buisness and used for Buisness use, then passed onto another buisness use then mayby exported, then returned as a Buisness tool, who Knows, If you do not have proof of VAT you may be the one to become liable, wether you pay the vat or not count it in as a potential cost as you would any other Problems that may occur,
Click to expand...

I avoided talking about what happens if a boat is exported then re-imported. The rules are very clear and can be found in summary on the RYA site and in detail (if you time to waste) on the HMRC site.

It is highly unlikely that a subsequent owner would be liable for VAT as it is the responsibility of the person who imports the boat.

You can of course dream up all sorts of complicated situations where there could be difficulties in sorting out - but it is not routine - HMRC only investigate when they have suspicions - and if they have suspicions so (hopefully) would an aware buyer!
 
Tranona said:
I avoided talking about what happens if a boat is exported then re-imported. The rules are very clear and can be found in summary on the RYA site and in detail (if you time to waste) on the HMRC site.

It is highly unlikely that a subsequent owner would be liable for VAT as it is the responsibility of the person who imports the boat.

You can of course dream up all sorts of complicated situations where there could be difficulties in sorting out - but it is not routine - HMRC only investigate when they have suspicions - and if they have suspicions so (hopefully) would an aware buyer!
Click to expand...
The Buyer asking the Question Has obvious reservations about the status, there are many reasons that vat is not Paid on Any sort of Items at the time of sale or entry into the country where buisness use. If they suspect vat has not been paid for any reason they will then require evidence which you must have. I refer to my Previous post. the Buyer may or may not accept what I have written If he purchases the problems may or may not fall on him.
 
From what I have read above then, can I conclude that I should not have to pay VAT on the whole cost of my boat when selling through a broker, only on the fee he charges me for his services.

I do in fact have a copy of a bill of sale from a broker who sold the boat to the gentleman I bought her off, I also have copies of many invoices, etc. that prove that she has probaly spent all of her life resident in the UK (in fact within 50 miles of me here) so the replies referring to importing and exporting are irrelevant in this case.
 
This is my understanding - no guarantees as to correctness. Only the courts can give you that.

Tranona is right that VAT documentation is an infrequent problem that gets a lot more publicity than it warrants. It's also the case that UK authorities are only interested if they think that something is fishy though the HMC&E do insist if you ask them that it's your responsibility to prove that VAT is not due on your boat if they believe it is. To do that you need documents and that's where the original invoice comes in. The system is that the original invoice proves VAT was paid and the fact that you still have it proves that it hasnt been reclaimed and the boat exported - and then sneeked back in. But there are alternatives and a chain of bills of sale from UK persons with the boat in the EU will also do for proof. In the UK that is.

In foreign jurisdictions you are more vulnerable. They couldnt care a damn what UK HMC&E think - try telling a Greek customs man to take note of UK HMC&E rules. You might be told exactly where to put the UK rules. Are you going to appeal right through to the EU? Do you expect support from the Embassy. Again like Tranona says it's a very rare issue but it isnt totally unknown. And at best it must be distressing to have to argue the case with no back up docs, in a foreign port, under a foreign legal system and in a foreign language.

It's always best to have full documents. But personally ( and assuming I had no reason the think anything was amiss other than lost invoices) I wouldnt lose sleep about docs on a boat that never went abroad. I wouldnt worry too much in N Europe for a two week holiday either. But I'd think twice about taking on an undocumented boat as a med liveaboard. However, re-selling is another issue altogether and the absence of documentation would certainly affect what I would pay for a boat.

Incidentally, the sale of a vat paid boat between two British people when the transaction takes place outside the EU is VAT able as I understand it ie you have to pay the vat all over again on re-import to the EU. Sounds daft but a pal had to do that.
 
peterkinver said:
From what I have read above then, can I conclude that I should not have to pay VAT on the whole cost of my boat when selling through a broker, only on the fee he charges me for his services.

I do in fact have a copy of a bill of sale from a broker who sold the boat to the gentleman I bought her off, I also have copies of many invoices, etc. that prove that she has probaly spent all of her life resident in the UK (in fact within 50 miles of me here) so the replies referring to importing and exporting are irrelevant in this case.
Click to expand...


A seller Never has to pay VAT. Your boat actually falls into a category called "deemed VAT paid" on account of its age - provided you can show that it was in the EU on a qualifying date (I think 1992). This somewhat curious status was part of the transition arrangements when VAT regulations were harmonised across the EU. There was a time when HMRC actually issued certificates confirming this on production of the relevant evidence. However, they stopped doing it many years ago because it was largely meaningless and they had no way of checking that VAT was paid!

So, although it is useful to have a VAT invoice, and if the boat were high value and recent build (when these things became more important) it is almost irrelevant on a 30 year old boat.

Your broker, if he is any good knows all about this. The key document in the transaction for you and the buyer is the Bill of Sale (and Part 1 registration if appropriate). That is the legal title to the boat.
 
Bosun Higgs said:
In foreign jurisdictions you are more vulnerable. They couldnt care a damn what UK HMC&E think - try telling a Greek customs man to take note of UK HMC&E rules. You might be told exactly where to put the UK rules. Are you going to appeal right through to the EU? Do you expect support from the Embassy. Again like Tranona says it's a very rare issue but it isnt totally unknown. And at best it must be distressing to have to argue the case with no back up docs, in a foreign port, under a foreign legal system and in a foreign language.

It's always best to have full documents. But personally ( and assuming I had no reason the think anything was amiss other than lost invoices) I wouldnt lose sleep about docs on a boat that never went abroad. I wouldnt worry too much in N Europe for a two week holiday either. But I'd think twice about taking on an undocumented boat as a med liveaboard. However, re-selling is another issue altogether and the absence of documentation would certainly affect what I would pay for a boat.

.
Click to expand...

Afraid there are inaccuracies here. The VAT rules are constant throughout the EU. The responsibility for VAT is in the state where the transaction took place. So, I bought my boat in Greece so I have a Greek Bill of Sale and a VAT receipt from a Greek company. If I brought the boat into the UK HMRC would not be at all interested as it does not fall into their jurisdiction as far as VAT is concerned.

The same with Greek officials - if your Bill of Sale is in the UK they will not be interested. They will, of course be interested if you bought the boat outside the EU and you are an EU citizen, and did not have evidence that you have paid VAT (and duty if appropriate).

Documentation required is Bill of Sale to show you have legal title, Registration document to confirm state of registration and usually insurance certificate (translated into local language for some countries). VAT receipt is desirable but in practical terms not essential. A Certificate of Competence such as an ICC for the skipper may also be required. All on the RYA site.

Cant see why lack of a VAT receipt should reduce the value of a boat unless its abscence leads you to believe that a VAT offence has been committed by the seller - in which case you might want to walk away.
 
Tranona said:
The VAT rules are constant throughout the EU. The responsibility for VAT is in the state where the transaction took place. So, I bought my boat in Greece so I have a Greek Bill of Sale and a VAT receipt from a Greek company. If I brought the boat into the UK HMRC would not be at all interested as it does not fall into their jurisdiction as far as VAT is concerned.

The same with Greek officials - if your Bill of Sale is in the UK they will not be interested. They will, of course be interested if you bought the boat outside the EU and you are an EU citizen, and did not have evidence that you have paid VAT (and duty if appropriate).
Click to expand...

In theory you are of course correct Tranona. The point I was making was that implementation of the rules isnt always consistent country to country and attempting to argue with foreign officials can seriously spoil your day. There are many many examples of practises that go against what we understand are EU rules, and indeed the UK govt is often accused of gold plating them, which is to say interpreting them differently to other EU countries.

So the only safe approach if you bare buying a boat for liveaboard in the Med is to make sure you have the full documentation. It follows from that that a cautious person ( and I am cautious when it comes to spending serious dosh) would not pay the same for a boat with docs as for one without.
 
Bosun Higgs said:
This is my understanding - no guarantees as to correctness. Only the courts can give you that.

Tranona is right that VAT documentation is an infrequent problem that gets a lot more publicity than it warrants. It's also the case that UK authorities are only interested if they think that something is fishy though the HMC&E do insist if you ask them that it's your responsibility to prove that VAT is not due on your boat if they believe it is. To do that you need documents and that's where the original invoice comes in. The system is that the original invoice proves VAT was paid and the fact that you still have it proves that it hasnt been reclaimed and the boat exported - and then sneeked back in. But there are alternatives and a chain of bills of sale from UK persons with the boat in the EU will also do for proof. In the UK that is.

In foreign jurisdictions you are more vulnerable. They couldnt care a damn what UK HMC&E think - try telling a Greek customs man to take note of UK HMC&E rules. You might be told exactly where to put the UK rules. Are you going to appeal right through to the EU? Do you expect support from the Embassy. Again like Tranona says it's a very rare issue but it isnt totally unknown. And at best it must be distressing to have to argue the case with no back up docs, in a foreign port, under a foreign legal system and in a foreign language.

It's always best to have full documents. But personally ( and assuming I had no reason the think anything was amiss other than lost invoices) I wouldnt lose sleep about docs on a boat that never went abroad. I wouldnt worry too much in N Europe for a two week holiday either. But I'd think twice about taking on an undocumented boat as a med liveaboard. However, re-selling is another issue altogether and the absence of documentation would certainly affect what I would pay for a boat.

Incidentally, the sale of a vat paid boat between two British people when the transaction takes place outside the EU is VAT able as I understand it ie you have to pay the vat all over again on re-import to the EU. Sounds daft but a pal had to do that.
Click to expand...

..... even the original VAT invoice is only proof that VAT hasn't been reclaimed or VAT paid status lost if there are also an unbroken chain of bills of sale between EU residents. Higgs is right however in most things.

As to real problems, the RYA has been trying for years to gather evidence (not fourth-hand bar-room gossip) of actual cases where "VAT paid but no proof" boats have actually been wrongly charged VAT again, so that they can argue for another 1992-style "deemed VAT paid" ruling. They do not appear to have any evidence that any real problems have occurred.

If you go to HMCE and say "My boat's got no VAT proof so can I please pay it now to be quite sure I'm legal" they will turn down your money as no VAT liable transaction has taken place.
 
Bosun Higgs said:
.

So the only safe approach if you bare buying a boat for liveaboard in the Med is to make sure you have the full documentation. It follows from that that a cautious person ( and I am cautious when it comes to spending serious dosh) would not pay the same for a boat with docs as for one without.
Click to expand...

I agree about the key documents that I quoted and admit that when I bought my boat in Greece I investigated the VAT issue very thoroughly - not least because before 2002 they did not follow VAT rules properly in respect of charter boats so boats came from charter fleets onto the private market without VAT ever being paid. I actually paid for my boat in 2001 but as it was on the charter register I did not pay the VAT until I took it off in 2007.

However, the whole issue of VAT and checking in foreign countries is over hyped. The RYA has asked members to report instances, this subject comes up on these fora regularly - there have even been polls about it and there is little evidence that UK residents are asked for proof - and usually where they are there is something "different" about the situation, for example home built boat or previously privately imported. The chances of a privately owned UK registered yacht that has a UK Bill of Sale showing the transaction was between private EU residents in the UK (that is the vast majority of UK boats) being asked for evidence is just about zero.

Of course if the history of the boat is not as straightforward as with mine it makes sense to have the documentation.
 
"It's also the case that UK authorities are only interested if they think that something is fishy though the HMC&E do insist if you ask them that it's your responsibility to prove that VAT is not due on your boat if they believe it is"

When did the law change in the UK.

When I lived in the UK the CPS had to prove you had broken the law (contravened the VAT act), not you have to prove that you have not.

Only in France that is the case which may be against the EU bill of human rights.
 
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