MBM and VAT advice

[jfm]

Ari there is no "ought" in boat pricing. People can pay whatever they like, and the laws of supply/demand apply obviously. The current state of the market is that AOTBE the demand curve is lower for boats without what the market sees as VAT paid status proved by a VAT invoice, and so to that extent I agree with you - ie the non VAT documented boat is "worth less"

Part of the discussion on here is about the fact that very many participnats in the used boat market misunderstand the law as to when VAT liabilities do and don't apply and to whom, due to the urban myth and for example RYA legal bods and MBY Brian solicitors issuing incorrect information in magazines. But the market is the market, whether it understands or doesn't; markets operate on what they believe. That's the way of the world eh?!

Professionals writing in mags however ought to be a bit ashamed of their misinformation. The whole hullablu around VAT paid status has come into existence in the last 6 or 7 years or so (I think) and loads of boats date back to before then and owners didn't keep VAT receipts because they didn't think they had to back then. I don't keept VAT receipts for my cars and TVs, but if the market changes 5 years from now so that VAT paid status becomes seen by the market as important, the then owners of those TVs and cars will be left short by the fact they dont have VAT invoices, just as current owners of older boats now are, and that aint fair. That's why I say the pros who write this garbage in mags should be a bit ashamed of themselves.

Ho hum. Life goes on eh?!

 

[EME]

I have limited knowledge --- but neither of your proposed answers are right.

You tell him that is a very strange reply from that owner in that he has no idea whether his boat is Vat paid or not .. go and ask him again for a few more details about its provenance.

 

[ari]

Ari there is no "ought" in boat pricing. People can pay whatever they like, and the laws of supply/demand apply obviously. The current state of the market is that AOTBE the demand curve is lower for boats without what the market sees as VAT paid status proved by a VAT invoice, and so to that extent I agree with you - ie the non VAT documented boat is "worth less"

Part of the discussion on here is about the fact that very many participnats in the used boat market misunderstand the law as to when VAT liabilities do and don't apply and to whom, due to the urban myth and for example RYA legal bods and MBY Brian solicitors issuing incorrect information in magazines. But the market is the market, whether it understands or doesn't; markets operate on what they believe. That's the way of the world eh?!

Professionals writing in mags however ought to be a bit ashamed of their misinformation. The whole hullablu around VAT paid status has come into existence in the last 6 or 7 years or so (I think) and loads of boats date back to before then and owners didn't keep VAT receipts because they didn't think they had to back then. I don't keept VAT receipts for my cars and TVs, but if the market changes 5 years from now so that VAT paid status becomes seen by the market as important, the then owners of those TVs and cars will be left short by the fact they dont have VAT invoices, just as current owners of older boats now are, and that aint fair. That's why I say the pros who write this garbage in mags should be a bit ashamed of themselves.

Ho hum. Life goes on eh?!

Fairy nuff. I suppose I'm rather lazily trying to ascertain whether, from a buyer/future seller point of view, I ought to be bothered about whether or not I have a VAT invoice.

And it seems (rightly or wrongly) that this hasn't changed and I should be bothered, or adjusting the value (offer/sale price) accordingly if not.

Maybe you should write a feature for the mags, see if they'll print it? It's certainly a very interesting and misunderstood topic, and what you've written on here has been a real education.

Thank you.

 

[Deleted User YDKXO]

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"?

I think thats probably a judgement call for the buyer. I know what I'd do and that is assume the boat was VAT not paid until some documentation was produced that proved otherwise and tell the broker my offer was reduced by 20% to take account of that. I would also be thinking that there are plenty of other boats on the market with proper documentation and that I didn't need the hassle of dealing with this one

 

[ari]

I have limited knowledge --- but neither of your proposed answers are right.

You tell him that is a very strange reply from that owner in that he has no idea whether his boat is Vat paid or not .. go and ask him again for a few more details about its provenance.

As above, the answer from the owner is "it's VAT paid as far as I'm concerned. But I've got no paperwork either way and I'm not particularly bothered, and neither should you be, see YBW.com for full details".

So come on, you're the buyer, there's your answer, put your money where your mouth is, what do you pay?

 

[ari]

I think thats probably a judgement call for the buyer. I know what I'd do and that is assume the boat was VAT not paid until some documentation was produced that proved otherwise and tell the broker my offer was reduced by 20% to take account of that. I would also be thinking that there are plenty of other boats on the market with proper documentation and that I didn't need the hassle of dealing with this one

And I think that in reality, that is what most, if not all, of us would do.

So far all the calls of "it's just a myth, it has no relevance whatsoever on secondhand boats", the truth is, VAT documentation in the form of a VAT paid invoice or whatever does indeed have great relevance to the value (and sale-ability I guess) of a used boat (albeit, possibly for all the wrong reasons).

 

[Deleted User YDKXO]

I don't keept VAT receipts for my cars and TVs, but if the market changes 5 years from now so that VAT paid status becomes seen by the market as important, the then owners of those TVs and cars will be left short by the fact they dont have VAT invoices, just as current owners of older boats now are, and that aint fair. That's why I say the pros who write this garbage in mags should be a bit ashamed of themselves.

Ho hum. Life goes on eh?!

Just to be pedantic, my parents were once stopped at Heathrow coming in from the USA and were asked to prove that they had purchased the various cameras, laptops and watches they had on them in the EU and that VAT had been paid on them. The items were taken off them and not returned until, luckily for them, they were able to produce the invoices some days later so maybe it is worth keeping VAT invoices on items you travel with? But then, my parents being aged white pensioners, they would have looked like hardened smugglers

 

[ari]

Just to be pedantic, my parents were once stopped at Heathrow coming in from the USA and were asked to prove that they had purchased the various cameras, laptops and watches they had on them in the EU and that VAT had been paid on them. The items were taken off them and not returned until, luckily for them, they were able to produce the invoices some days later so maybe it is worth keeping VAT invoices on items you travel with? But then, my parents being aged white pensioners, they would have looked like hardened smugglers

So what's to stop the exact same thing happening with your boat as you sail into Dover harbour?





***Somewhere in London JFM begins sobbing quietly...***

 

[neale]

As above, the answer from the owner is "it's VAT paid as far as I'm concerned. But I've got no paperwork either way and I'm not particularly bothered

I would suggest that as the buyer does seem bothered in this case, rightly or wrongly, the seller should also be bothered. It's a buyers market and the seller can't afford to let a potential buyer slip away by not being bothered.

This 4 year old £1m Squadron should be very easy to track in terms of its history, its owners, who sold it etc etc. If I was the seller I would be looking to do all I could to help the buyer overcome his concerns so I would be speaking to the previous owner and the selling dealer to see what I could come up with.

If I was the buyer, I would assume the sellers attitude meant that he had something to hide so would look elsewhere.

However, if i was the buyer and the seller did all he could to help, and maybe even come up with a copy of the original bill of sale from the dealer, which shouldn't be hard to get on a 4 yo boat. I would be happy to buy it. The nominal 20% is a bit of a non issue. Of all the Squadron 58's on the market there is going to be a decent difference in the asking price anyway. There is unlikley to be an exact same boat, exact same spec, exact same engine hours and service history to compare it to allowing you to reduce the price by 20%. The buyer pays what he/she thinks the boat is worth, taking into account ALL of the factors. If VAT paperwork is among them, so be it.

I would say though that this can be turned on its head. If lack of VAT paperwork doesn't prove whether VAT was paid or not, surely the same can be said of paperwork showing VAT. As mentioned elsewhere with the Spanish boat there is such a thing as forged VAT paperwork. Maybe the paperwork is original, but the VAT was reclaimed.

Caveat Emptor

 

[Deleted User YDKXO]

So what's to stop the exact same thing happening with your boat as you sail into Dover harbour?





***Somewhere in London JFM begins sobbing quietly...***

Well obviously in the case of my parents, Customs were having a purge on people buying stuff in the USA and 'smuggling' it back into the UK without paying duty or VAT. I understand it happens quite often. In the case of boats returning to Dover, clearly Customs don't think wholesale smuggling of non VAT paid boats into Dover is a problem because nobody seems to be able to give examples of such Customs checks

 

[neale]

So what's to stop the exact same thing happening with your boat as you sail into Dover harbour?

Here's a real life story that does have some similarities.

Many years ago I took my Bayliner to Guernsey. Unfortunatley the petrol engine decided to let go while I was over there so I had to abandon the boat and come home. A few weeks later I got the boat shipped back as deck cargo and landed, on a trailer, at Weymouth.

Now when I picked it up, I had to speak to Customs and, I guess becasue the boat had come from the CI's, they asked me about VAT. I didn't have any other paperwork on me that day other than the SSR certificate which was in the boat. I explained what had happened and all they wanted to see was something that proved I hadn't just bought the boat in the CI's. I showed them the SSR, which was a couple of years old at that point, and they accepted this as proof that the boat originated from the UK, as per my story, and not the CI's. AT this point they let me take the boat away. There was never a request to prove that VAT was paid on the boat at any other point in its life. Just that the boat was already in the UK and therefore, I guess, deemed VAT paid by the very people whose job it is to collect import duty and VAT.

 

[Hurricane]

We are all looking at this as the buyer
Very few posts consider the seller in the process.

My point is that - for a UK boat that hasnt ever been exported, VAT will have to have been paid (or at least accounted for).
I believe that generally, a UK boat that isn't VAT paid will be owned by a VAT registered body and it is their responsibility to account for VAT when they sell.

So, taking ari's point.
Is a VAT paid boat worth more than one without?
For a UK boat, the point is irelevant.
Both boats are worth the same.
Obviously, the one that is VAT paid doesnt attract VAT
The one without VAT will attract VAT when its is sold to a private individual (the seller will have to pay the VAT to HMRC).
So, the seller will have to charge VAT on the transaction - if he chooses to sell it at a "VAT free" price, the sell will still have to pay a "grossed down" figure to HMRC.
And you will find that reputable companies wont deal without VAT because they are liable.
So its the seller who is setting the price.
As I say, the two boats are the same value.

Just a point that most seem to miss.
The option of buying a VAT unpaid boat doesnt really exist.

Except for boats exported out of the EU that is.

 

[neale]

We are all looking at this as the buyer
Very few posts consider the seller in the process.

My point is that - for a UK boat that hasnt ever been exported, VAT will have to have been paid (or at least accounted for).
I believe that generally, a UK boat that isn't VAT paid will be owned by a VAT registered body and it is their responsibility to account for VAT when they sell.

So, taking ari's point.
Is a VAT paid boat worth more than one without?
For a UK boat, the point is irelevant.
Both boats are worth the same.
Obviously, the one that is VAT paid doesnt attract VAT
The one without VAT will attract VAT when its is sold to a private individual (the seller will have to pay the VAT to HMRC).
So, the seller will have to charge VAT on the transaction - if he chooses to sell it at a "VAT free" price, the sell will still have to pay a "grossed down" figure to HMRC.
And you will find that reputable companies wont deal without VAT because they are liable.
So its the seller who is setting the price.
As I say, the two boats are the same value.

Just a point that most seem to miss.
The option of buying a VAT unpaid boat doesnt really exist.

Except for boats exported out of the EU that is.

This was kinda my point earlier. People are assuming that a boat without VAT paperwork is an Ex VAT boat when it is infinetly more likely to be a VAT paid boat but without any paperwork.

In theory then there are three types of boats.

VAT paid with paperwork
VAT paid without paperwork
and Ex VAT.

If you buy an Ex VAT boat you will have to pay the VAT on it, either to the Seller, or directly to C&E when you import it.

If you buy a VAT paid boat without the paperwork you are not going to have to pay the VAT, EVER.

In the case of a smuggled boat, this vessel would clearly be EX VAT.

The only problem, and the one that is the basis or Ari's argument is:

How do you tell and Ex VAT boat (posibly smuggled) from a VAT paid boat without paperwork?

My answer would be by due diligence on the part of both seller and buyer.

 

[Deleted User YDKXO]

We are all looking at this as the buyer
Very few posts consider the seller in the process.

My point is that - for a UK boat that hasnt ever been exported, VAT will have to have been paid (or at least accounted for).
I believe that generally, a UK boat that isn't VAT paid will be owned by a VAT registered body and it is their responsibility to account for VAT when they sell.

So, taking ari's point.
Is a VAT paid boat worth more than one without?
For a UK boat, the point is irelevant.
Both boats are worth the same.
Obviously, the one that is VAT paid doesnt attract VAT
The one without VAT will attract VAT when its is sold to a private individual (the seller will have to pay the VAT to HMRC).
So, the seller will have to charge VAT on the transaction - if he chooses to sell it at a "VAT free" price, the sell will still have to pay a "grossed down" figure to HMRC.
And you will find that reputable companies wont deal without VAT because they are liable.
So its the seller who is setting the price.
As I say, the two boats are the same value.

Just a point that most seem to miss.
The option of buying a VAT unpaid boat doesnt really exist.

Except for boats exported out of the EU that is.

I don't agree with that because it applies only to boats being sold by one VAT registered company to another or to a private individual, in which case, yes you're right, it is the seller's responsibility to account for the VAT but most transactions are between private individuals and no VAT is involved in the transaction. In the latter case, it is clearly in the buyer's interest to ask for documentation which purports to show that VAT was paid at some time on the boat because the buyer will want to establish that he is not buying a boat that has been smuggled into the EU without paying VAT and presented as a VAT paid boat. There are also boats within the EU that have been legally imported on a temporary basis without VAT having been paid and which could be advertised as VAT paid boats. This may be an issue in the UK with the proximity of the Channel Islands from where boats are routinely sailed into EU waters on a temporary non VAT paid status. On that basis any buyer would have to assume for his own security that a boat presented as VAT paid without documents to prove it, was a smuggled boat and therefore worth less by the amount of VAT it might attract.
Anyway its all very academic. The fact is that, rightly or wrongly, the market demands proof of VAT paid documents and mortgage lenders (AFAIK) demand proof of VAT paid documents. Any buyer would be stupid to buy a VAT paid boat without documentation because it might make it more difficult for him to sell the boat to another buyer who believes that VAT documentation is required, even if that buyer is mistaken

 

[gjgm]

Just a point that most seem to miss.
The option of buying a VAT unpaid boat doesnt really exist.

Except for boats exported out of the EU that is.

Yes;NickH put the same, in effect.
As JFM, and Ari, say though, that doesnt stop people only being prepared to offer less for some boats, based on a fear or misunderstanding, and such is the market.
Omitting smuggling and dodgy history, though...
Let say there are 10,000 boats bobbing about the Uk, and lets say someone amazingly manages to come up with a cracking list of VAT successes by HMRC on VAt/boat claims (dont ask me how!!!!!);lets say 100 cases?
So, 100/10,000 * £1mio=£10,000.
IE the chance that you might end up paying VAT mathematically equates to a £10,000 on a £1mio boat.
Only, not many of us buy £1mio boats, and there certainly are not 100 cases to cite, and HMRC cant even legally make a case (other than smuggling).
I dont suggest this is the answer, and I know people dont live their lives by calculating risks, but it is quite easy to calculate a very small number here.
Say £100k boat and ten cases, and it's a meal for two!
(Just a game, guys )
Edit: sorry, very senior moment! The number should be calculated on the VAT amount, not the boat value, making the numbers even smaller.

 

[jfm]

The option of buying a VAT unpaid boat doesnt really exist.

That's true 99.999% of the time in the UK Mike but in the Med generally it is very possible to buy a non VAT unpaid boat due to (a) the VAT laws in Fr and IT and (b) the very large number of TI-ed boats (of which you get virtually none in UK)

 

[jfm]

***Somewhere in London JFM begins sobbing quietly...***

Not sure why I'm sobbing Ari . It's well known customs stop passengers with shopping on return flights from NYC, esp when the £ bought nearly 2 bucks. And it's well known they dont stop pleasure boats coming into Dover. Difference is, very few pleasure boats arriving in Dover are being smuggled from outside the EU whereas everyone on the monday morning JFK-LHR virgin flight landing monday morning when £1 = $2 has been shopping outside the EU and quite a few are technically smuggling.

 

[neale]

non VAT unpaid boat

Come again

A genuine VAT unpaid boat though will usually be sold as such, no?

The only issue you are going to have is if one of those genuinly VAT unpaid boats is being sold by some unscupulous individual or company as VAT paid. Does that happen in the Med?

 

[jfm]

A genuine VAT unpaid boat though will usually be sold as such, no?

Sure. But hurricane was saying you can't actually a buy a VAT unpaid boat without triggering a requirement to pay or account for VAT, if I understnad his post correctly

 

[neale]

OK

So the issue is the very few boats that are being smuggled, or those sold by a dishonest VAT registered company somewhere within the boats life.

A good history of previous UK or EU ownership, preferably over the entire boats life will rule out a smuggled boat. Previous bills of sale between private individuals should rule out a VAT registered company being involved.