Insurance for VAT problems?

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Neal

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Does anyone know if there's an insurance company who, for a one off premium, would give cover against the risk of future VAT problems arising on a used boat?

I thought this would be a common place by now, analogous to the indemnity available for defects in the title to property. My enquiries so far have raised a complete blank.

I'm sure there would be a big demand for this, in these days of difficult to prove VAT provenance.

Many thanks.


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I think insurance companies would consider this to be an uninsurable risk because it might tempt people to defraud on taxes.

John

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Don\'t accept that argument....

1) doesn't the same apply to most insurance? eg Does theft insurance on a car encourage people to get their car nicked? Does Household insurance encourage people to throw wine on the carpet to get a new carpet? Does life insurance encourage people to murder?

Well, yes, in some cases all of these are positives. The insurance market, however, relies on the majority of us being upright, honest citizens, and all of those risks are insurable.

If you can give evidence of the steps taken to prove VAT status in a particular case, I'd have thought it fairly easy assess risk levels.

2) is it that easy to fraudulently avoid VAT on a big purchase like a boat? You'd need the co-operation of a VAT registered business for that to work. Sure, some may take cash when we're dealing in £00s, but does it work if we're talking £0000s?

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Re: Don\'t accept that argument....

The problem you're facing here is that insurance is a volume market. They balance off risks against reward. It's possible to insure almost anything, but the cost may sometimes be prohibitive.

If only 3 people in the UK ask for an insurance product, it will be very expensive. This is the same as having a mould built for a one off grp boat, not usually cost effective, unless many boats are built from the mould.

If the insurance company is unsure what the risk is e.g. they haven't insured for it before, and don't have a history of the insurance, and no track record, and have to consult marine legal eagles to ask questions about VAT issues, the insurance underwriters bills to research this area will soon become very expensive.

They will only undertake this sort of expensive assessment if they see a market that will pay the bills and underwrite the risk.

If you want this sort of insurance, you'll probably need to take the idea to specialist marine insurance broker, who can assess the risk and explain the proposed policy to the underwriters. It would help a great deal if you could take a potential market to them - ie a list of people who would take out that insurance if it was available

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this sort of one-off cover is traditionally the province of the lloyd's market. you'll need to find a lloyd's marine broker.

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Re: Don\'t accept that argument....

The analogy that I am thinking of is where I was participating in organizing a golf competition. We intended to offer an expensive car for anybody making a hole in one at a certain hole. We then enquired about insuring ourselves against this possibility.

The insurance companies told us that this was an uninsurable risk. I don't remember the exact terms they used but it involved us creating the conditions in which the "accident" would take place.

What you are suggesting here is that you insure yourself against the non-respect of tax law - for whatever cause - and I don't think the insurance companies or Lloyds would buy it.

But I may well be wrong.

John


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I see it differently.....

you weren't seeking insurance against an accidental loss. you were effectively asking the insurers to sponsor the prize. And the whole point was that participants would try their their utmost to get that whole in one.

I am thinkng of insuring against a possible claim by, say, French Customs if someone can't produce an original VAT receipt.

I may be wrong, too. I am an accountant not an insurance specialist, but the cases have nothing in common as far as I can see.

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Insurance is underwritten for a risk that cannot be forseen but can be envisaged - eg earthquake. This is the nature of the product. If you do not have evidence that your vessel is VAT paid, who is going to insure that one? Would you?

May I suggest you take steps with the UK VAT authorities - ie Customs and Excise -to procure paperwork that will protect you in the event you are challenged anywhere in the EU. A little work on your part will establish whether your boat was launched before the VAT regulations on pre-existing boats came into force; look at engine plates for starters. With diligence it is hard to conceive you will not find what you need for this purpose.

PWG

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VAT on boats is my specialist subject....

I am an Accountant, and my query was raised as a result of work I am undertaking for a client. It is a very common problem nowadays, that many boats built after the critical date of 1st Jan 1985, but before the Maastricht Treaty came into force on 31st december 1992 do not have the original VAT invoices. The owners had no way of knowing how important that invoice would become.

Some careless owners post 1992, of course, can also mislay invoices.

I wish UK HMCE were as helpful as you imply. My experinces over the last few years confirm that they will not give any opinion on whether a boat is VAT paid. Indeed, it is their written policy not to do so. If you have the name of a contact at HMCE who is prepared to, I would be enormously grateful to know it.

As regards your other point. It is very common in property transcations that it is not possible to give an absolute proof of ownership. In such cases it routine to take out an indmnity. The lack of original VAT invoice seems a closely analogous case to me.

I am not alone in feeling this is a growing problem - speak to the BMIF, the RYA, and other professionals in this field.

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Re: VAT on boats is my specialist subject....

Thanks to a negligent broker, I had the Vat problem when I bought my boat 6 years ago. Provided a copy invoice together with other evidence that the boat had been in the UK since new etc to HMCE and they happily provided a letter saying that vat had been paid etc. Cant give you the name of the individual person, but as late as last year thee HMCE were still telling enquirers that they would provide this service.

What it is worth is a different matter. In theory, the vat status of a uk boat owned by a uk resident and bought from another uk resident is not a concern of the customs in any other european state - its a uk tax matter. try explaining that to a french douanier who is wanting to be difficult / got out of the wrong side of the bed/ the wrong bed! so why will he accept a uk customs letter? written in english! and after the war in Iraq.

Cant trust Jonny Foreigner you know!

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There\'s been a restructuring at HMCE....

Last year I could get letters from my local VAT office giving an opinion on VAT status. Now, I'm told, there are written policy instructions stating that such opinions must not be given.



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Re: There\'s been a restructuring at HMCE....

In that case my info might be out of date.

Should they wish to do so, HMCE should be able to confirm that vat has been paid and not reclaimed. You might well think that the government should help the governed who pay their salaries. Not so in the UK. Treat the citizen with contempt!

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Absolutley! Here\'s a good example...

Three years ago, I was again trying to produce satisfactory VAT evidence on a boat. I wrote to HMCE, asking why they no longer run the small boat VAT unit in Dover, which was set specifically to give an opinion on VAT status. The reply explained that the unit had been closed because it couldn't cope with the huge demand.


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No, there isn\'t, ...

... it's another example of the inflexibility of the yachting insurance market compared with other sectors. With my last yacht I tried to insure against the seller in a private sale not having genuine title. Nothing doing, and I gathered similar risks (like VAT) would get the same reaction.

I suppose it is because so few understand yachting, that they will not take on out-of-the ordinary risks. And I suspect collusion. With a few noteworthy exceptions, if one insurer won't cover something, then none of them will. When I tried to insure the title, the first insurer thought about it for a couple of weeks. The others gave me an almost immediate reply, like they knew about it and had collectively decided. Of course, a lot of so-called yacht 'insurers' are really just brokers.

Incidentally I also got the reply from Dover customs that they had stopped issuing VAT SADs for yachts because of the volume of work. What nonsense!
 
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