MBM and VAT advice

[Deleted User YDKXO]

Very simply, it's a common belief that without adequate proof of VAT payment the new owner could be liable for a previous owners VAT (whether smuggling related or otherwise, that's the myth). Therefore, lack of said "proof" will make a boat harder, or impossible to sell to some buyers. Other buyers will want to pay less, in case they have a VAT problem.

Well I think that myth has been well and truly put to bed by jfm et al but that still doesn't alter the fact that a VAT paid boat is worth more than a non VAT paid one and therefore you still need documentation to prove the VAT status of a used boat

 

[Observer]

Against that background, the legal advice on that other thread to cash pay maybe £30k VAT to the wrong country to "buy" a piece of paper that you can wave at officials in the event this very unlikely demand for VAT-paid paperwork arises is really quite remarkable, as I know you know!

Sssshh! I'm busy working out the details of a 'get rich quick' scheme that exploits this loophole by which a debtor can legally extinguish a large liability to Peter by paying a smaller amount that he doesn't owe to Paul. It's got massive commercial potential, I can tell you!!

 

[DAKA]

Well I think that myth has been well and truly put to bed by jfm et al

Accepted and thanks to jfm and others for sharing their knowledge.

Of course its only any use to the few who have read these forums, and even those few may well forget by the time they buy their next boat.

The YBW article will have been read by a much wider audience including the Yacht Broker community who may have been wrongly encouraged to place more significance on VAT docs than perhaps they should.

Do you think there will be a retraction of the article / further explanation ?
And what about the RYA advice ?


Although jfm explanation should have changed peoples perceptions unfortunately this is another classic case of being right isnt always very useful if in practice everyone else is wrong !

 

[jfm]

Sssshh! I'm busy working out the details of a 'get rich quick' scheme that exploits this loophole by which a debtor can legally extinguish a large liability to Peter by paying a smaller amount that he doesn't owe to Paul. It's got massive commercial potential, I can tell you!!

If you can crack that one Observer and the patent isn't already registered to a firm in Plymouth I'll do a joint venture with you. You do the legals so that we're sure Peter loses his debt claim, and I'll produce the customers in the form of about 20 or 30 large LBO debtors (Southern Cross, Four Seasons, Peacocks*, Agent Provocateur**, Ferretti, Formula 1, Samsonite, etc etc et al) who in aggregate borrowed ~€50bn of LBO debt in the 2005-6-7 peak. We'll be minted.

*Dang, too late
** Site visits required

 

[gjgm]

you still need documentation to prove the VAT status of a used boat

Only it doesnt, right?
After all I took the boat to Croatia, and back, and am giving you an old document, and the boat is actually "smuggled" back into EU.

Hell, I dont know. Could HMRC say the VAT doc is worthless, and lets be done with it

 

[DAKA]

Only it doesnt, right?
After all I took the boat to Croatia, and back, and am giving you an old document, and the boat is actually "smuggled" back into EU.

Hell, I dont know. Could HMRC say the VAT doc is worthless, and lets be done with it

I dont think you need to go to that much trouble, just take a VAT paid boat to the Channel Islands for 3 years, the VAT paid status is lost as the boat is regarded as exported to none EU country.

Bring the boat back to the UK/EU country , sell it as VAT paid (you still have the VAT receipt) and the boat is still liable for 20% VAT (import duty).

Technically original VAT receipts on boats over 4 years old are about as much use as a chocolate tea pot (do we need to study retained berthing contracts and carry them with us as well).


Disclaimer

Explanation simplified in the interests of forum text.

 

[Observer]

If you can crack that one Observer and the patent isn't already registered to a firm in Plymouth I'll do a joint venture with you. You do the legals so that we're sure Peter loses his debt claim, and I'll produce the customers in the form of about 20 or 30 large LBO debtors (Southern Cross, Four Seasons, Peacocks*, Agent Provocateur**, Ferretti, Formula 1, Samsonite, etc etc et al) who in aggregate borrowed ~€50bn of LBO debt in the 2005-6-7 peak. We'll be minted.

*Dang, too late
** Site visits required

Yep. We'll take a humungous arrangement fee from Peter and register an apparently arms length company to be "Paul". Double whammy.

 

[ari]

Well I think that myth has been well and truly put to bed by jfm et al but that still doesn't alter the fact that a VAT paid boat is worth more than a non VAT paid one and therefore you still need documentation to prove the VAT status of a used boat

I think that in one sentence you've very lucidly summed up the point I was hamfistedly trying to get to!

To go back to the scenario that started this thread, chap has a VAT paid boat (he says) but no documentation. Is told the boat is worth less without proof of VAT having been paid at some point (normally via a VAT receipt).

Therefore, as you say, surely since a non VAT paid boat is worth less than a VAT paid boat (are we all agreed on that by the way?) then the fact that this chap cannot prove VAT was ever paid (whether later claimed back or not) means that most buyers will regard it (from a paperwork perspective) as potentially VAT not paid and value accordingly?

Ergo, expect to get a bit less for it?

 

[jfm]

Double whammy.

I like your thinking. I've just ordered a few chalk-pinstripe suits with red lining to wear on the roadshows.

 

[Observer]

I like your thinking. I've just ordered a few more chalk-pinstripe suits with red lining and red braces to wear on the roadshows.

Fixed that for you.

 

[jfm]

 

[jfm]

blimmin RYA...

Well I randomly picked up the current MBM tonight, Feb 2012 issue, and there is a VAT piece on p71 written by Mandy Peters, described as "RYA Legal Executive". I hadn't seen it before - is this what prompted this thread gigm?

Anyway, in writing about a 2nd hand boat sale in UK between 2 UK individuals, she writes that the seller is free to sell the boat even if he has lost the original vat invoice but that buyer "could be liable for payment of VAT at the used boat value". She goes on to say this is an unlikely but possible scenario.

This is completely and utterly wrong. There is no law anywhere in the UK that creates this VAT liability and there is zero chance the HMRC will assess it. Absolutely zero. Mandy is 100% wrong. If RYA see this and disagree, just cite the section of law that imposes this VAT charge please and I'll shut up.

If RYA legal are broadcasting this via MBM and possibly their helpline too, we kinda have no hope of reducing the urban myth factor here do we. Ho hum...

 

[Hurricane]

Well I randomly picked up the current MBM tonight, Feb 2012 issue, and there is a VAT piece on p71 written by Mandy Peters, described as "RYA Legal Executive". I hadn't seen it before - is this what prompted this thread gigm?

Anyway, in writing about a 2nd hand boat sale in UK between 2 UK individuals, she writes that the seller is free to sell the boat even if he has lost the original vat invoice but that buyer "could be liable for payment of VAT at the used boat value". She goes on to say this is an unlikely but possible scenario.

This is completely and utterly wrong. There is no law anywhere in the UK that creates this VAT liability and there is zero chance the HMRC will assess it. Absolutely zero. Mandy is 100% wrong. If RYA see this and disagree, just cite the section of law that imposes this VAT charge please and I'll shut up.

If RYA legal are broadcasting this via MBM and possibly their helpline too, we kinda have no hope of reducing the urban myth factor here do we. Ho hum...

Its the RYA - I dont believe ANYTHING they say.
I'm only a member cos it pays more in discounts and free ICCs than it costs to be a member.

I had a big run in with the RYA about 8 years ago when they actually hindered a sailing event I was running - IMO, they are supposed to support the sport not hinder it.

They might have changed now but my experience left bitter wounds and I'm not sure I'll ever see them in a good light.

Your point about the MBM article just emphasises things for me.

Sorry - thats how I feel.

 

[gjgm]

Yes it was JFM.
First, it seemed wrong..second- and perhaps the somewhat failed purpose of my original post- I thought it would be helpful and an opportunity to clarify/dispel (each forum member choose his own option to this!) some of the myths on VAT and boats.
I think anyone who reads these threads is aware that to most people this is a complex and confusing subject, but the article didnt do much to clarify the murky waters!

 

[Nick_H]

Well, its not that complex -

You can't ever be held liable for previously unpaid VAT on a private used boat purchase, but the boat itself could be seized if it has been illegally imported.

If the situation can be summed up in one short sentence, then how on earth can it be too complex for the RYA, specialist solicitors, nearly every used boat broker, and the two main boating magazines to comprehend?

 

[gjgm]

Well, its not that complex -

You can't ever be held liable for previously unpaid VAT on a private used boat purchase, but the boat itself could be seized if it has been illegally imported.

QUOTE]

Complex- the law, or the mess the boat selling market makes of it, though,Nick?
I dont think many who have read two years of posts on the topic think it is simple!
I accept that might be because of all the inaccuracies that people put forward that then propogate into "fact".
Certainly complex to get the message across. Given the importance placed on that VAT doc, people are going to have to believe smuggling of boats is more rampant than new sales!

 

[Nick_H]

Complex- the law, or the mess the boat selling market makes of it, though,Nick?
I dont think many who have read two years of posts on the topic think it is simple!
I accept that might be because of all the inaccuracies that people put forward that then propogate into "fact".
Certainly complex to get the message across. Given the importance placed on that VAT doc, people are going to have to believe smuggling of boats is more rampant than new sales!

Yes, I agree, and with your previous post too. My point was exactly that. The VAT situation is not complex at all, it has just been surrounded by so much noise, propagated by the very people who should be de-mistifying it, that it now seems extremely complex to your average boat buyer. Maybe that suits their purpose? If boat buyers don't need to worry about VAT, then one less reason to use a broker, solicitor, join the RYA, or buy a boating mag?

 

[ari]

So to return to the question raised earlier and never answered, are we now saying that there should be no difference in value between a VAT paid secondhand boat, and a non VAT paid secondhand boat?

So two identical Fairline Squadrons, one with the VAT never paid (as per the ex JFM example above).

One should be £1,000,000 incl VAT, the other ex VAT boat should be £1,000,000 ex VAT.

Correct?

 

[neale]

So to return to the question raised earlier and never answered, are we now saying that there should be no difference in value between a VAT paid secondhand boat, and a non VAT paid secondhand boat?

So two identical Fairline Squadrons, one with the VAT never paid (as per the ex JFM example above).

One should be £1,000,000 incl VAT, the other ex VAT boat should be £1,000,000 ex VAT.

Correct?

I don't think anybody is sying that. There is a difference between an ex VAT boat and a boat that is VAT paid but doesn't have the paperwork. IF a boat is ex VAT it will definatly be cheaper to buy than a VAT paid boat. If you are buying an ex VAT boat, say from the Channel Islands, you have to accept that you will be required to pay VAT on it on import so will pay that much less.

If you are buying a VAT paid boat that has no paperwork it doesn't mean that VAT is liable again so the boat will be worth the same as one that is VAT paid with paperwork.

There are going to be some boats that may raise suspicion and that I personally would want to see a VAT receipt for. A boat with a Guernsey registration being sold in the UK as VAT paid for example. A 10 year old Sealine with a bunch of previous bills of sale between private indivduals all in the UK would be much less of an issue.

 

[ari]

OK, so an ex VAT boat would be deemed to be worth less than a VAT paid boat. That would be my reckoning too.

So, to return to the question posed above.

Your mate is buying a Sq58 off the second owner. The boat is four years old and up for sale for a million quid (lets assume that's a fair value for a VAT paid Sq58, I have no idea).

He asks about the VAT situation and is met with shrugged shoulders and told "no idea mate, my buddies on YBW.com told me it wasn't my concern. I presume the previous owner sorted the VAT out, either when he bought it or when he sold it to me, but frankly his VAT affairs are non of my business, I just bought a used boat. It's no different to me buying a secondhand TV is it?"

When asked for any VAT documentation he's given the same answer and nothing is forthcoming.

It's a great boat, you mate wants it, and the owner wants the equivalent of a fair VAT paid price.

What now skip?

Do you go with the advice above, which is that the VAT situation is of no relevance whatsoever to an owner down the line, and therefore the absence of VAT documentation is also of no relevance, in which case you tell your mate to pony up and buy the boat for a million quid?

Or do you say to your mate "if he's got no proof of VAT payment, and he doesn't know (or says it is VAT paid but has no evidence to back that up), then you ought to be paying less for his boat"?