Hypothetical United Kingdom VAT Issue

[Irish Rover]

There are a couple of real case VAT threads going at the moment and I don't want to derail them by raising red herrings so I'll do so here.
Let's assume I'm a UK resident and I buy a UK based boat, owned by a private individual, which I'm told by the broker is VAT paid. I get bills of sale showing ownership for more than 5 years and any sales were private individual to private individual and no indication any VAT payable transaction took place.
Legally do I need to do more searching? Am I legally obliged to get proof that VAT was not illegally evaded at some point in the boat's history?
If in a few year's time the customs authorities come along and say the boat was brought into the UK without VAT being paid -say 7 years before I bought it - am I liable for the VAT? Can HMRC confiscate my boat?

 

[Tranona]

No. There is no legal requirement to keep evidence of VAT payment on a boat. The responsibility for accounting for VAT is firmly with the VAT registered entity that sold the boat to the first private owner. A huge number of boats have no evidence of VAT payment, although boats first sold in the last 15 years or so when it started to become "important" to keep the original invoice are more likely to have evidence. The potential grey areas are private imports and boats owned at some point in their lives by VAT registered entities, for example charter boats. However the responsibility for payment rests with the individual who owned the boat at the time of import, not with subsequent owners who bought in good faith. It is possible for HMRC to impound a boat that is the subject of a dispute about historic payment of VAT, but in reality it is extremely unlikely, partly because HMRC do not keep any records of payment for private imports.

HMRC have far more important things to do than look for potential historic non payment of VAT on private leisure craft owned by non VAT registered individuals. The danger point for individual buyers is typically the scenario being discussed elsewhere, that is boats that come up for sale where it is obvious they have recently moved to the UK from another customs area. This is likely to become more common now we are no longer in the EU but the normal searches on history should reveal potential danger points.

 

[Irish Rover]

Excellent post @Tranona Thank you.
In your final paragraph you mention a "danger point for individual buyers". I take it the "danger" only exists if the buyer knowingly buys a boat which was imported without VAT being paid. If the buyer receives apparently good paperwork surely HMRC will be looking elsewhere for a defaulter as per the earlier part of your post.

 

[benjenbav]

The real difficulty is perceptual: that the next buyer will be put off by believing the exact opposite of what Tranona, jfm (and probably others) have said over and over again. To wit that owing to the lack of paperwork from six transactions ago HMRC can and will impound your new-to-you boat and for good measure smash down your front door and take away your dog.

 

[Irish Rover]

@benjenbav You might want to edit your post to make it more clear our resident experts are not, in fact, saying the bits following your "To wit".

 

[Tranona]

Bluefin's original question (as I understood it) illustrates the danger where the boat has been offered for sale with a lack of clarity about where it has been, but is in the UK and currently owned by a non resident. To my mind it is the responsibility of the broker and vendor to provide documentation that confirms it can be legally sold in the UK - not just VAT but also any certification. Good brokers will do this as a matter of course. Boats in similar circumstances offered by the owner require even more caution.

Although HMRC do not go actively looking for problems the post Brexit regime that requires all boats entering the UK to get customs clearance may identify more that need investigation.

 

[Tranona]

take away your dog.

A couple were admiring my lovely black Lab the other day and expressed a desire to adopt her, Soon changed their mind when I showed them a photo of our cat that would be an essential part of the deal!

 

[Irish Rover]

Bluefin's original question (as I understood it) illustrates the danger where the boat has been offered for sale with a lack of clarity about where it has been, but is in the UK and currently owned by a non resident. To my mind it is the responsibility of the broker and vendor to provide documentation that confirms it can be legally sold in the UK - not just VAT but also any certification. Good brokers will do this as a matter of course. Boats in similar circumstances offered by the owner require even more caution.

Although HMRC do not go actively looking for problems the post Brexit regime that requires all boats entering the UK to get customs clearance may identify more that need investigation.

The purpose of this thread was to get away from BlueFin's two threads and get some general clarity. Your excellent #2 makes it clear it is not necessary for a private buyer to establish the VAT history of a boat they are buying from a private owner. Of course many of us will want more including proof of VAT but there's no obligation for us to get it.

 

[Tranona]

The purpose of this thread was to get away from BlueFin's two threads and get some general clarity. Your excellent #2 makes it clear it is not necessary for a private buyer to establish the VAT history of a boat they are buying from a private owner. Of course many of us will want more including proof of VAT but there's no obligation for us to get it.

I should stress that this position applies in the UK and that in the EU many states require owners to have evidence of VAT payment as part of their registration and tax systems. The details vary from state to state. Also evidence that VAT has been paid in a member state is required for the boat to have free circulation as EU goods. Even with that some states also require a T2L which is nothing to do with VAT!

A lot of the problems of VAT particularly for UK boat owners when we were in the EU stemmed from the UK's hands off approach to documentary evidence reflecting the fact that we had a VAT system that long pre-dated the EU (1992) and our legislation was modified to just a minimum to comply with the EU requirements with no attempt to link it to individual boats. Not surprising given the lack of legal status of boats and no compulsory registration.

 

[Irish Rover]

@Tranona you painted a very clear and understandable picture in #2. Why not leave it at that. The rest is just confusing the issue.
I've edited the thread title to make it clear, if it wasn't already from my opening post, that I was referring only to UK VAT.

 

[benjenbav]

@benjenbav You might want to edit your post to make it more clear our resident experts are not, in fact, saying the bits following your "To wit".

I’m glad you picked up on this. I wrote it as I did in order to illustrate the absurdity of the fact that we’re all trapped in this circle where fact is irrelevant and we have to care about nonsense stuff bcs - excuse my french - the next dimwit will.