MBM and VAT advice

[gjgm]

Do I dare write this...
"On the proof of VAT issue,you could sell the boat without this,provided the purchaser was made aware that this is missing, and that they could be liable for payment of VAT at the used boat value"
(Second hand ten year old boat.)
Right class;who has been paying attention this week?Hands up who knows under what circumstances?If any?
(Put your hand down JFM, or it is extra lines for you)

 

[ari]

Presumably when a foreign customs official demands proof, you haven't got it, and he demands payment?

What do I win?

 

[Tranona]

I'll have a shot to see if I can get the gold star rather than the lines.

One situation is if the boat has been imported from outside the EU and the importer did not pay. Liability is still with him, but also attaches to the boat so HMRC could seize the boat in lieu of payment - which would be based on the value at time of import, not its current value.

As its late at night I get to keep the gold star until tomorrow when an expert will come along and blow me out of the water.

 

[gjgm]

Well I cant work it out either! I thought you couldnt be liable at the current value of the boat?
I guess you might get asked for VAT abroad (but I thought they had no claim if the boat was UK kept?)
I thought the overall conclusion was other than smuggling, you cant be liable for a VAT event that you were not involved in (ie the original purchase).
The article does suggest it is unlikely to happen, but the buyer will probably want a heavy discount because he may have to pay VAT.
I thought this was just the false impression we were trying to avoid...

I had better start my lines....

 

[ontheplane]

My understanding, which may of course be wrong, is that although YOU can't be involved in a VAT transaction from the past, the boat CAN - and as it's now your boat, it's now your problem.

I also thought the VAT due was based on the VAT due when it should have first been paid unless the VAT at that point was legally and legitimately reclaimed, in which case it follows down the line until the point where the VAT could NOT have been legitimately reclaimed - and that's the level it's due at.

Bit like used vans.... They can be VAT qualifying for years if the people buying them recover the VAT - Then someone non-VAT registered buys it, pays the VAT and presto - VAT paid, no more VAT liability.

 

[jfm]

I also thought the VAT due was based on the VAT due when it should have first been paid unless the VAT at that point was legally and legitimately reclaimed, in which case it follows down the line until the point where the VAT could NOT have been legitimately reclaimed - and that's the level it's due at.

Imho, gold star to otp for getting that exactly right in the face of solicitor's and troubledwaters advice on t'other thread and MBY that evaded VAT is only payable at 20% of the market value of the contraband goods at the time you get caught. IE the tax laws offer you a financial incentive and reward for evading VAT.

 

[gjgm]

Imho, gold star to otp for getting that exactly right in the face of solicitor's and troubledwaters advice on t'other thread and MBY that evaded VAT is only payable at 20% of the market value of the contraband goods at the time you get caught. IE the tax laws offer you a financial incentive and reward for evading VAT.

Right, but if we assume the guy has owned the boat since new (implied, but confirmed), had the docs but has lost them over the ten years, HMRC arent going to come after the next owner for VAT at the now current price, unless in some very very rare situation there has been some dodgy footwork that concerns HMRC back in the past?
My reading of the article is that they might, even if unlikely, and so buyers will want to negotiate the price down.
I thought that the message ought to have been that there is all but no VAT risk, and so no need look to lower your bid...

 

[ari]

I thought that the message ought to have been that there is all but no VAT risk, and so no need look to lower your bid...

And fingers crossed that a future buyer feels the same way, or you'll be the one that loses out due to the first owner having lost his paperwork?

 

[gjgm]

And fingers crossed that a future buyer feels the same way, or you'll be the one that loses out due to the first owner having lost his paperwork?

OK, but if there isnt a meaningful risk, why the urban myth.

 

[ari]

Would you do it? Pay full whack for a boat without proof of VAT and hope that when you come to sell, your buyer feels the same way?

 

[gjgm]

Would you do it? Pay full whack for a boat without proof of VAT and hope that when you come to sell, your buyer feels the same way?

Ari, that wasnt the point of my thread.
If there is all but bu**er all risk, propogating the myth that there might be a VAT liability is only making things worse.
Would I pay full whack?
Depends.
On a ten year old boat, probably, yes.It will probably be 13-15 years old when I sell it...
On a two year old boat where I couldnt get to the bottom of its import/export/company ownership, probably not.
Frankly, if there really isnt a VAT issue and someone tries to get money off on the rumour that there is, I wouldnt spend the time time trying to sell him the boat anyway.
While there might be some extremely unusual circumstances where VAT may be payable- so bizarre that it caused a very lengthy thread on here- my understanding is that a lost piece of paper doesnt make the next owner liable for VAT on the orginal transaction (I think that was JFM's point last year).
If a would purchaser doesnt accept or understand that, he can move on.

 

[ari]

I must admit I haven't read all of the other thread but has it been decided that there is absolutely no chance or occurrence of a foreign customs officer demanding proof of VAT paid status and demanding payment if none?

From the previous monster thread on the subject, I seem to recall that this was the potential issue.

 

[ontheplane]

If the boat was originally bought from a UK dealer - surely that Dealer should be able to confirm that VAT was paid originally???

If they looked up their records, and could show it was invoiced to an individual then that should be ok - of course if it was invoiced to a business that's somewhat different, as that business may have found a dodge to claim back the VAT I suppose...

 

[Nick_H]

We've established (or at least been reliably told) that HMRC can come and impound our boat if a previous owner smuggled it. The previous owner obviously isn't going to tell us that, so if buying a VAT paid used boat we can never be absolutely sure that we wont lose our shirt for reasons related to VAT. In that situation, a VAT invoice provides some evidence (but not absolute proof), that VAT has been correctly accounted for in past transactions, and that the boat hasn't been smuggled, so there is some real benefit to seeing a VAT invoice, in addition to the perpetuating myth aspect that it will just be easier to sell.

I'm sure smuggling of boats is rare, but with the channel islands just a hop away, its not that unlikely.

 

[Nick_H]

If the boat was originally bought from a UK dealer - surely that Dealer should be able to confirm that VAT was paid originally???

If they looked up their records, and could show it was invoiced to an individual then that should be ok - of course if it was invoiced to a business that's somewhat different, as that business may have found a dodge to claim back the VAT I suppose...

Individuals can be VAT regsitered, so that doesn't prove it either way.

 

[Tranona]

I must admit I haven't read all of the other thread but has it been decided that there is absolutely no chance or occurrence of a foreign customs officer demanding proof of VAT paid status and demanding payment if none?

From the previous monster thread on the subject, I seem to recall that this was the potential issue.

There is always a chance that you will be asked, particularly if there is an indication that the boat has been imported or is owned by a corporate body. However, demanding payment is a different matter. If the last transaction took place in another state then they have no jurisdiction.

There is little evidence that boats are routinely checked, but many examples of individual cases. However in the individual cases there is usually a sound explanation. Example, but not necessarily typical is Flavio Briatores yacht that was impounded in Italy on the basis that it was his personal yacht and if he wanted to use it in the EU it was liable for VAT. He claims it was not his but a legitimate charter boat that was exempt. He is still using it so assume his lawyers were smarter than the Italian revenue.

However that kind of case is a different world from most peoples' experience but does illustrate that the revenue are perhaps more interested in cases where there is both the opportunity for evading tax and the sums involved are an incentive - both for the evader and pursuer.

The "myth" is so well entrenched and reinforced by bodies such as lenders that is difficult to dislodge it. Most people go into boating to forget about such things, so understandable that they try to avoid getting into grey areas.

 

[Tranona]

If the boat was originally bought from a UK dealer - surely that Dealer should be able to confirm that VAT was paid originally???

If they looked up their records, and could show it was invoiced to an individual then that should be ok - of course if it was invoiced to a business that's somewhat different, as that business may have found a dodge to claim back the VAT I suppose...

It is not as simple as that. Problem in many cases is that the supplier is no longer in business, and anyway there is no legal requirement to keep the records for more than 6 years. In some cases it is quite easy to trace back to the original transaction but in many cases not, hence the advice to keep the original invoice as it is the only record.

 

[ari]

We've established (or at least been reliably told) that HMRC can come and impound our boat if a previous owner smuggled it. The previous owner obviously isn't going to tell us that, so if buying a VAT paid used boat we can never be absolutely sure that we wont lose our shirt for reasons related to VAT. In that situation, a VAT invoice provides some evidence (but not absolute proof), that VAT has been correctly accounted for in past transactions, and that the boat hasn't been smuggled, so there is some real benefit to seeing a VAT invoice, in addition to the perpetuating myth aspect that it will just be easier to sell.

I'm sure smuggling of boats is rare, but with the channel islands just a hop away, its not that unlikely.

Thank you, that's saved me some reading!

So, not a myth then?

 

[madabouttheboat]

Thank you, that's saved me some reading!

So, not a myth then?

It is a myth in as much as:

There has been not one single case of a UK boatowner, who has bought a secondhand boat in the UK for personal leisure use, being asked or having to pay, VAT on the boat after the event.

 

[jfm]

If they looked up their records, and could show it was invoiced to an individual then that should be ok - of course if it was invoiced to a business that's somewhat different, as that business may have found a dodge to claim back the VAT I suppose...

Even if the business that bought the boat reclaimed the VAT on it at an earlier stage in its life, the boat is still VAT paid in the sense (a) it has a VAT invoice which addresses the urban myth point and (b) the bona fide innocent new owner cannot in any circumstnaces whatsoever be liable or have the boat seized for any past dodgy VAT reclaim made by the previous seller

I don't want to get into another long thread but you know that TV I bought from Curry's? Well it was made in Korea by Samsung, using parts imported from US and China, then sold to Samsung Europe BV and imported into a distribution centre in Rotterdam, then sold to Samsung UK Limited who brought it to the UK, and then sold it to Curry's. So a couple of imports and a couple of VAT payments and reclaims in its history, and I'm the 4th owner or something like that. There is no way HMRC are going to be interested in contacting me about Samsung's or Curry's VAT arrangements, so the urban myth beleivers really need to chill .