MBM and VAT advice

[Nick_H]

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

That's true today, because all of the cogs in the wheel of boat selling perpetuate it. If the parties involved (RYA/ABYA etc.) sent out clear factual and accurate guidance to their members, and the mags printed correct info for a change, then in time people might start to work on the facts, not the hype.

That's not to say a VAT invoice will not be required, and isn't a very useful document to have. It's probably the single best piece of evidence that the boat hasn't been smuggled, but its not proof. A buyer might need more evidence to satisfy himself that the boat hasn't been smuggled, or he might be able to satisfy himself without ever seeing the VAT invoice, by seeing continuous annual berthing contracts for instance. It's due diligence, as someone else said.

The current way of doing things doesn't work for buyer or seller. The genuine seller of a "VAT paid" boat can lose out on his selling price just for lack of a piece of paper, and, in theory, a buyer can buy a smuggled boat that he could later lose because he's been told the VAT invoice is everything.

 

[ari]

and, in theory, a buyer can buy a smuggled boat that he could later lose because he's been told the VAT invoice is everything.

Showing my ignorance again no doubt, but surely if the buyer has a VAT invoice to "XYZ Charter" as the first owner for instance, and they reclaimed the VAT on purchase but didn't pay the VAT when they sold it on, then he's got proof that it is not his liability, it's XYZ Charter's liability?

Bit like JFM's telly from Comet. If he's got a VAT receipt from Comet then just because Comet go bust and never pay the VAT due on his telly, doesn't make him liable.

So to that end, a VAT paid invoice shows that VAT was paid, and the boat is in the clear (ie go chase the company that should have settled it).

 

[jfm]

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

A is correct. B isn't and you're being duped by the hype

 

[jfm]

That's true today, because all of the cogs in the wheel of boat selling perpetuate it. If the parties involved (RYA/ABYA etc.) sent out clear factual and accurate guidance to their members, and the mags printed correct info for a change, then in time people might start to work on the facts, not the hype.

Allelujah!

The current way of doing things doesn't work for buyer or seller. The genuine seller of a "VAT paid" boat can lose out on his selling price just for lack of a piece of paper, and, in theory, a buyer can buy a smuggled boat that he could later lose because he's been told the VAT invoice is everything.

Yup, and the mags, RYA, yacht brokers et al are all to blame

 

[neale]

A is correct. B isn't and you're being duped by the hype

I don't think I am. I'm on your side and agree that it is hyped.

So in actual fact, all you have to worry about is the possibilty that the boat has been smuggled at somepoint in its life from outside the EU.

That is really quite easy with paperwork that proves ownership over the years. If any single owner lived outside the EU, be wary of VAT. If not you're in the clear.

 

[jfm]

... if the buyer has a VAT invoice to "XYZ Charter" as the first owner for instance, and they reclaimed the VAT on purchase but didn't pay the VAT when they sold it on, then he's got proof that it is not his liability, it's XYZ Charter's liability?

Bit like JFM's telly from Comet. If he's got a VAT receipt from Comet then just because Comet go bust and never pay the VAT due on his telly, doesn't make him liable.

Exactly correct (but alas NOT what the RYA legal bod or Brian Legal wrote in the current issues of MBM and MBY!)

So to that end, a VAT paid invoice shows that VAT was paid, and the boat is in the clear (ie go chase the company that should have settled it).

Well it shows VAT was accounted for, which is a slightly different thing from paid, but let's not get into that. As for "in the clear", it is possible (though in most cases incredibly unlikely) the boat was sold in the UK with VAT paid by buyer and a VAT invoice, then the buyer recovered the VAT, then exported it outside EU, then buyer or someone else smuggled it back into EU, making the boat liable to seizure by customs in the re-import country*, despite the fact it has a pukka VAT invoice (which is what Nick-H alluded to in his last para a few posts above. But there is a perfectly good due diligence route to manage that risk which is to see the boat's servicing history, logbook, mooring history etc (none of which the blimmin RYA educates its members about...).

* which liability Brain Legal who is MBY's columnist says you can extinguish by paying less money voluntarily to the tax authorities in a different country. Observer's Peter/Paul thing. This gives you an example of the stupid advice there is out there even from soi disant marine specialist solicitors, ffs

 

[Deleted User YDKXO]

That's true today, because all of the cogs in the wheel of boat selling perpetuate it. If the parties involved (RYA/ABYA etc.) sent out clear factual and accurate guidance to their members, and the mags printed correct info for a change, then in time people might start to work on the facts, not the hype.

Agree with that. At the moment there is a disconnect between what buyers/sellers perceive and what the reality is but as we know, its perception that drives markets. Just as an aside, I've bought a few used boats in Europe and European buyers and sellers are nowhere near as preoccupied with historical documentation as we are in the UK. Maybe they are right and we are wrong. Having said this, I have still insisted upon getting proper documentation with my purchases because I never know whether I might be reselling the boat to a picky UK buyer!

 

[jfm]

I don't think I am. I'm on your side and agree that it is hyped.

Yes, sorry, my comment was a bit abrasive maybe, done in a hurry and not intended, but i apologise and can fully see that you are not one of the hyped mob!

So in actual fact, all you have to worry about is the possibilty that the boat has been smuggled at somepoint in its life from outside the EU.

That is really quite easy with paperwork that proves ownership over the years. If any single owner lived outside the EU, be wary of VAT. If not you're in the clear.

Allelujah! That is perfectly correct. Though, alas, as Ari/Deleted User say you shouldn't expect the guy buying the boat from you a few years down the line will be as rational as you (esp if he is advised by RYA) so you do need to consider missing docs when valuing the boat, even if your diligence tells you there is no way you or the next owner will be liable to VAT or boat seizure

 

[DAKA]

So to that end, a VAT paid invoice shows that VAT was paid, and the boat is in the clear (ie go chase the company that should have settled it).

Deleted bit as inaccurate

There is one scenario which appears to be getting overlooked.

A boat is VAT paid.
A UK owner takes his boat on holiday to the CI and stays for 3 years, returns to the UK and sells his boat as VAT paid (which it was) along with the original VAT receipt.

BUT
because the boat has been outside the EU for 3 years it is treated as exported (it has lost its VAT paid status) and should have been charged 20% import duty when it came back to the UK. thats what the C1331 declaration is for that most people seem to ignore anyway.

Even if you have the original VAT invoice and VAT has been paid for once it does not follow with 100% certainty that the boat does not have a second 20% liability attached to it.unlikely with newer boats but could be applicable to older boats


Disclaimer

if jfm says this is total 8 oll ks (ignoring abbreviated laymen's terms) then I will delete it so as not to start another rumour.

 

[jfm]

... I never know whether I might be reselling the boat to a picky UK buyer!

I don't think they're instrinsically picky mike, it's just that they're advised by RYA, Brian Legal and they read MBM/MBY

There was a long article about July 2009 in MBY that described it better but no-one has memory that long. I don't still have the article but it did contain this paragraph:
Q24: Can my boat be impounded in the UK if I cannot prove that VAT is paid?
A: Except in limited circumstances, if you have complied with the law, no. VAT is generally only due on two events: the sale of a boat by a VAT-registered seller (in which case the VAT liability falls on the seller not the buyer), and on import into the EU (in which case the VAT is payable by the importer). There is only one circumstance in which an innocent buyer of a boat can be liable for VAT that someone else failed to pay previously. This is if the boat is imported and the importer failed to pay the import VAT. Import VAT falls under the same laws as customs duties, and therefore such a boat is smuggled. Smuggled goods can generally be seized by HMRC, even if they no longer belong to the smuggler. Thus, the reason you might wish to have proof of VAT payment on a second-hand boat is to guard against the risk it is smuggled and liable to seizure. HMRC do not pursue a policy of assuming “smuggled until proved otherwise” and couldn’t under the law, so the likelihood of this becoming a problem for a second-hand boat buyer is very small. HMRC would have to have some reasonable grounds for believing your boat is smuggled before they could contemplate seizing it from you. Nevertheless, to remove doubt completely, it makes sense to get proof of VAT status when buying second-hand.

 

[jfm]

As far as I am aware when a company re claims the VAT , they have to return the original VAT invoice to the revenue.

That's worse than mere bolllocks Daka. It is totally rotting horseshiit with flies on it. Do some maths and work out the size of the shed HMRC would need to store 6 years worth of all b2b invoices in the UK. If you think it's smaller than Yorkshire, your maths is wrong

There is one scenario which appears to be getting overlooked.

A boat is VAT paid.
A UK owner takes his boat on holiday to the CI and stays for 3 years, returns to the UK and sells his boat as VAT paid (which it was) along with the original VAT receipt.

BUT
because the boat has been outside the EU for 3 years it is treated as exported (it has lost its VAT paid status) and should have been charged 20% import duty when it came back to the UK.

Yes that's true but those circumstnaces are incredibly unlikely to exist and we have already agreed above that buyer just needs to do his diligence. In your example the papers should show the 3 years of Jersey berthing, hencebuyer can spot the problem (well, at least he could if well advised by RYA, which he isn't...)

 

[ari]

That is really quite easy with paperwork that proves ownership over the years. If any single owner lived outside the EU, be wary of VAT. If not you're in the clear.

Allelujah! That is perfectly correct. Though, alas, as Ari/Deleted User say you shouldn't expect the guy buying the boat from you a few years down the line will be as rational as you (esp if he is advised by RYA) so you do need to consider missing docs when valuing the boat, even if your diligence tells you there is no way you or the next owner will be liable to VAT or boat seizure

Hang on a min. JFM lives (I presume?) within the EU, and he ran a boat that had no VAT paid on it.

If I bought it from him sans VAT paperwork and he didn't pay the VAT, how does that square with "If any single owner lived outside the EU, be wary of VAT. If not you're in the clear."?

Doesn't sound like I'm very in the clear to me...

 

[benjenbav]

Allelujah! That is perfectly correct. Though, alas, as Ari/Deleted User say you shouldn't expect the guy buying the boat from you a few years down the line will be as rational as you (esp if he is advised by RYA) so you do need to consider missing docs when valuing the boat, even if your diligence tells you there is no way you or the next owner will be liable to VAT or boat seizure

A couple of years ago I sold a boat which I had bought second-hand from EBY to another dealer who wanted to discount the price because I didn't have the original VAT invoice. (All in UK)

"Irrelevant," sez I.

"Got another buyer?" sez he.



Let's bust this godawful myth.

 

[Deleted User YDKXO]

. If any single owner lived outside the EU, be wary of VAT. If not you're in the clear.

Not quite true. You can live in the EU and still own a non VAT paid boat outside the EU. Me for example. I have a non VAT paid boat in Croatia. I could very easily import it into Italy and put it on the market as a VAT paid boat, if I felt so inclined. The importation could even be done legally if the ownership structure is correct. Similarly, there are UK residents who own non VAT paid boats in the CI and who could easily bring the boat to the UK and advertise it as VAT paid. I'm saying this kind of smuggling is widespread because I'm sure it isn't; it's just an issue that prospective buyers should consider. Maybe more precise advice would be to check for any evidence of the boat having been registered outside the EU which may indicate that VAT has not been paid

 

[neale]

Hang on a min. JFM lives (I presume?) within the EU, and he ran a boat that had no VAT paid on it.

If I bought it from him sans VAT paperwork and he didn't pay the VAT, how does that square with "If any single owner lived outside the EU, be wary of VAT. If not you're in the clear."?

Doesn't sound like I'm very in the clear to me...

Because JFM is an honest and upright citizen he will sell the boat as Ex VAT so there is no issue.

 

[jfm]

Hang on a min. JFM lives (I presume?) within the EU, and he ran a boat that had no VAT paid on it.

If I bought it from him sans VAT paperwork and he didn't pay the VAT, how does that square with "If any single owner lived outside the EU, be wary of VAT. If not you're in the clear."?

Doesn't sound like I'm very in the clear to me...

You're right Ari. When i read Neale's post i thought of correcting him by saying it is not the residence of the owner but the location of the boat that should trigger alarm bells. But I thought "too pedantic" and have spent way more time on this than i want to today (flight to antibes this evening, leave office 4.15pm, so rushing). But yes, if reading with precision as you are doing, Neale's "in the clear" bit that you quote is not correct and shouldn't be followed to the letter. Sorry!

 

[jfm]

registered outside the EU which may indicate that VAT has not been paid

Flag state is very unreliable mike. The cases you hypothesise about could all be EU flagged including UK flagged. The only thing you might suspect if you see a non EU flagged is a TI-ed boat, becuase TI is the only time flagging is relevant to VAT (a boat MUST be non EU flagged in order to qualify for TI). But if you buy a TI-ed boat you always be safe becuase either (i) the seller will drive 12.1 miles from the coast before handing over the BoS and if you don't see the significance of that you're beyond help anyway; or alternatively (ii) the boat becomes automatically "VAT paid" becuase the VAT liabilty on a TI boat that is not sailed 12.1nm from the coast for the handover is always with the seller not the innocent buyer (by operation of law)

PS, I think there's a "not" missing from your post

 

[neale]

Not quite true. You can live in the EU and still own a non VAT paid boat outside the EU. Me for example. I have a non VAT paid boat in Croatia. I could very easily import it into Italy and put it on the market as a VAT paid boat, if I felt so inclined. The importation could even be done legally if the ownership structure is correct. Similarly, there are UK residents who own non VAT paid boats in the CI and who could easily bring the boat to the UK and advertise it as VAT paid. I'm saying this kind of smuggling is widespread because I'm sure it isn't; it's just an issue that prospective buyers should consider. Maybe more precise advice would be to check for any evidence of the boat having been registered outside the EU which may indicate that VAT has not been paid

If the boat was brought into Itlay without VAT being paid then it is smuggled and the subject of smuggled boats have been dealt with. (paperwork would show a Croation connection)

If you imported it correctly, but still avoided paying VAT, I would guess that the ships paperwork would allude to the possibilty of ex VAT status, ie it wouldbe in a company name. (happy to be corrected here as I know nothing of how this system would work)

The UK owner with a boat in the CI would be another case of a smuggled boat. The boats paperwork would almost certainly give the game away that the boat had spend time in the CIs and that therefore it might be ex VAT. A properly imported boat from the CI will have a recent, ie on importation, VAT invoice to go with it.

 

[Deleted User YDKXO]

Flag state is very unreliable mike. The cases you hypothesise about could all be EU flagged including UK flagged. The only thing you might suspect if you see a non EU flagged is a TI-ed boat, becuase TI is the only time flagging is relevant to VAT (a boat MUST be non EU flagged in order to qualify for TI). But if you buy a TI-ed boat you always be safe becuase either (i) the seller will drive 12.1 miles from the coast before handing over the BoS and if you don't see the significance of that you're beyond help anyway; or alternatively (ii) the boat becomes automatically "VAT paid" becuase the VAT liabilty on a TI boat that is not sailed 12.1nm from the coast for the handover is always with the seller not the innocent buyer (by operation of law)

PS, I think there's a "not" missing from your post

Yes, the Ferretti dealer in Croatia seems to Delaware register some of his stock boats and then temporarily import them into Italy in order to sell them presumably because he thinks the market in Italy for his boats is better than Croatia. He will sell the boat in Italy but make sure he exports the boat back to Croatia for the money to change hands and BoS issued. He could, if he was a rogue I suppose, advertise those temporarily imported boats in Italy as VAT paid which is why I said a non EU registration somewhere along the line might be a warning sign. I think this practice of dealers temporarily importing boats into Italy for sale is quite widespread in the Adriatic. I don't know about other areas of the EU

 

[gjgm]

(flight to antibes this evening, leave office 4.15pm, so rushing). QUOTE]
Cripes.. what are we going to do til you land? Sounds like I ll have to do some work this afternoon.