MBY Feb 2012 - Legal Aid (VAT) article

[jfm]

From reading the original feature it implies that it is possible to get confirmation from a tax authority that vat has been paid on a specific transaction. Admittedly a boat is usually a big vat payment, but do the vat offices really keep records of every boat ever sold?

If that was the case why do we need invoices?

I thought that the vat office only keeps records of a summary of a companies claims or payments for a given quarter or year. The specific transactions by that company are held in the companies records that they only need to keep for 7 years (6 in spain).

So if the dealer was naughty and didn't actually pay the vat amount to the vat office how can a boat purchaser know it has been paid? and how can they check it ?

Is it me or is boat vat invoice keeping a nonsense that has been propagated and expanded on over time? Has anyone had their vat position questioned by a tax authority?

Exactly! You get it! Just as i describe in my post above, if you and I each buy a TV, and Curry's pays some VAT but not the full amount to HMRC, no-one knows whether it is your TV or mine that didn't have VAT paid on it. The legal position is of course that both TVs are VAT paid

The failure by a VAT registered trader, in a non import scenario, to pay VAT in relation to his net sales for a month does not result in anything he sold that month being "not VAT paid". None of his customers can get their purchases seized by the tax authorities.

 

[benjenbav]

Not sure I agree with jfm's point #6. I thought a TV was a bloke in a frock. Didn't know you could get them at Curry's. But you live and learn.

 

[volvopaul]

A weymouth broker, maybe 2 were eventually caught fiddling paperwork about 2 years ago, they thought it was easy pocketing the vat on CI boats brought over here and sold.

I did hear they got to 5m before HM got involved, there now doing time.

JFM I love the way you educate us over these matters, very interesting keep it up.

cheers.

 

[Pinnacle]

My beer money is on jfm.

 

[jfm]

If that was the case why do we need invoices?

The benefit of the invoice is it gives comfort (as opposed to proves!) that the boat was previously the subject of a sale in which the seller was required to account for VAT. That in turn gives you comfort (doesn't prove) the boat was not smuggled, because, it is pointless smuggling goods then accounting for VAT on the sale of them. It would be like robbing a bank and handing in the money to pay off your overdraft. Bear in mind it is easy to smuggle a boat, so it is nice to have comfort it wasn't smuggled.

Becuase a boat can only be seized if smuggled, a buyer who has comfort the boat has never been smuggled has got comfort that it wont be seized for unpaid VAT. Hurrah!

That, in a nutshell, is why you want an invoice. If you could get some other way of establishing that the boat was sold in a VATable transaction, that would suffice instead of the invoice. But the brokerage world doesn't "get" that and so has got everyone's knickers twisted about having an invoice

I have been very careful to avoid saying invoices prove anything. For starters, we have seen in this episode that docs can be forged. And if for example, a boat was smuggled from Gib into Spain, and forged papers were made to show alleged payment of Spanish VAT, and then it all gets discovered that the docs are forged, and then someone "cures" that by paying VAT to UK HMRC and getting a VAT receipt, the boat has ooer lovely fresh unforged papers showing VAT paid. But that doesn't mean it can't be seized next time it pops into Palma. So beware of "proof". What you're getting is comfort.

 

[Harry25]

VAT

Enjoyed reading your replies jfm and thanks for taking the time to explain in layman terms Vat transactions.

 

[kashurst]

So what we really need is boat registration from first sale in the eu. To be registered vat must have been paid and received by HMRC (or eu equivalent) then the ships register or ssr records that, the same as they record boat mortgages. If the boat came from outside eu it has to be registered and hence the vat has to be paid. If it is not on a register you have to pay the vat . I think all eu countries have ships registers (maybe not switzerland but they are all honest anyway)

there after no more boat vat fraud, no more bits of essentially meaningless paper.

er do't we already do this with cars??????

PS if the hmrc and our eu friends were really worried about boat vat why aren't they down the marinas checking.
PPS why dont MBY do a constructive useful article instead.

 

[jfm]

So what we really need is boat registration from first sale in the eu. To be registered vat must have been paid and received by HMRC (or eu equivalent) then the ships register or ssr records that, the same as they record boat mortgages. If the boat came from outside eu it has to be registered and hence the vat has to be paid. If it is not on a register you have to pay the vat . I think all eu countries have ships registers (maybe not switzerland but they are all honest anyway)

there after no more boat vat fraud, no more bits of essentially meaningless paper.

er do't we already do this with cars??????

PS if the hmrc and our eu friends were really worried about boat vat why aren't they down the marinas checking.
PPS why dont MBY do a constructive useful article instead.

Blimey no. The massive costs of an IT system for that will be a waste of money, that boat owners will have to cough up. And it wont work - VAT can arise on a boat that has previously had VAT paid on it (export then reimport). And what possible purpose is achieved by registering that boat X was bought from dealer Y for £100k + £20k VAT, that can't be achieved just by saving the VAT invoice? And it cannot record that dealer Y actual paid to HMRC the VAT on that boat, becuase there is no concept of that having happened in VAT law, because non-importation VAT does not attach to specific goods. Indeed, many boat delaers like the essexoatyards of this world recover VAT each quarter rahter than pay it to HMRC, due to the volume of their exports. So you really have no basis in law to say on your register that they have paid VAT on a particular boat sold to a UK customer And identity theft on boats is the easiest thing in the world - I have already said on here I had a new HIN number moulded into my 2009 Sq58 after it had been delivered to me. This register of yours would be pan-European, right? Sheesh. Then there are lots of boats that are quite correctly not VAT paid. And what about those EU citizens who for very good non tax reasons choose a non EU register like Cayman? They should not be denied that freedom. And so on. You are proposing a big expensive solution that fails to cure a problem we don't have!

Switzerland does have a shipping register, as does Luxembourg, despite no coast

Tax authorities are not worried, hence they are not down in the marinas checking. The worry is all made up by yachtbroker types.

MBY did a good article about 18 months ago (though it didn't deal with the subject in the way a thread on here can)

 

[gjgm]

OK, thanks. Immediately, it seems odd that if I pay Currys VAT and they dont pay it to HMRC, then legally HMRC accept the TV is VAT paid, even though they didnt manage to collect the tax.
So it is as if Currys act as HMRC's agent (laymans wording!) in the VAT collection, and so why the problem lies between Currys and HMRC, and not between the punter and HMRC.
Very interesting, thanks.

 

[Hurricane]

OK, thanks. Immediately, it seems odd that if I pay Currys VAT and they dont pay it to HMRC, then legally HMRC accept the TV is VAT paid, even though they didnt manage to collect the tax.
So it is as if Currys act as HMRC's agent (laymans wording!) in the VAT collection, and so why the problem lies between Currys and HMRC, and not between the punter and HMRC.
Very interesting, thanks.

Thats the way I've always seen it.
As I say its the seller who is made responsible for collecting the VAT.
Think about it - if a private individual were made responsible, we would all need to be registered or at least need to have a VAT account with HMRC- huge costs.

 

[gjgm]

Thats the way I've always seen it.
As I say its the seller who is made responsible for collecting the VAT.
Think about it - if a private individual were made responsible, we would all need to be registered or at least need to have a VAT account with HMRC- huge costs.

Yes, I can see the logic of it all now.

 

[EME]

OK, thanks. Immediately, it seems odd that if I pay Currys VAT and they dont pay it to HMRC, then legally HMRC accept the TV is VAT paid, even though they didnt manage to collect the tax.
So it is as if Currys act as HMRC's agent (laymans wording!) in the VAT collection, and so why the problem lies between Currys and HMRC, and not between the punter and HMRC.
Very interesting, thanks.

I'm being dim again, I dont see why folks believe that is 'odd' ....
seems logical and normal to me.

Isnt it exactly the same as an employer deducting PAYE and NI on an employee's behalf and then paying that over to HMRC? The employer is liable for that -- and any employee would be a bit miffed if HMRC came chasing him/her for what they had already had deducted from their wages rather than chasing the employer?

THe VAT registered body performs exactly the same function as the employer... no?

 

[MYAG]

..........THe VAT registered body performs exactly the same function as the employer... no?

Yup, both unpaid tax collectors! Outrageous imho.

 

[Nick_H]

Yup, both unpaid tax collectors! Outrageous imho.

... but eminently sensible surely, rather than employ an entire army of additional tax inspectors (at taxpayers cost) to deal with the extra 10 million+ individual tax returns?

 

[gjgm]

I'm being dim again, I dont see why folks believe that is 'odd' ....
seems logical and normal to me.

I had imagined that HMRC approach might be that they didnt get the money, and that is your problem.. the paper trail isnt their concern-HMRC would come back to you , the buyer, and say , sorry pal, we didnt get the VAt money:you still owe us, and you can fight for "your" money back from (Currys).
I can see the impracticalities of that approach now, though.

 

[stillwaters]

Been a little bit busy but,for the sake of clarity,feel I should respond to this.
Firstly,I would certainly not have suggested that you had lost the plot,indeed I think that some of your points are every bit as helpful as any in dealing with what is still a messy and confusing system.
However,despite this, some of the details seem to be clearer than others. For a post-1984 non-commercially operating vessel in EU waters or,for a similar vessel owned by an EU resident,vat has to be paid and this liability is incumbent on any such owner until such time as the vat is paid. The amount of vat due will be against either the then invoice price in whichever EU regime is involved or if artificially low,the value they approve. Obviously,an owner of a non vat paid vessel could,as some possibly still do,take the view that,as they have got away with it so far,then why not let it continue? Fine,so long as they are able to keep a low profile especially as,up to now,the UK has been comparatively easy going,though there have been more recent suggestions that it may not continue so. So,once it becomes time to sell the vessel,the seller will be expected to declare it to be non vat paid to any would-be buyer. And trying to get round this by using an earlier invoice whilst knowing that the vat had not actually been paid would be fraudulent. Possibly hence the reason why a solicitor in a practice with a specialist marine division recommended the action taken by their client - attempt to claim an appropriate amount from the party who had sold them the boat (whilst letting them attempt the same back down the chain) and pass this on by way of a price reduction to the next buyer who could then choose to either pay vat against that sale price at the time or sit on it until selling-on being forced to pay it.
In not paying it,however,the owner takes the risk of what the consequences might be if discovered. Hopefully,very little or nothing but the various EU customs regimes do have the power to seize boats where it is believed tax has been avoided and this has certainly been evident in at least France,Spain and,in particular,Italy where there have been crackdowns on vessels of various flags,both EU and non-EU,which purported to be non vat payable charter boats - only they weren't. Dare I also mention Briatore's yacht,seized with his wife of three years aboard for non-payment of tax on I think 700,000 litres of fuel etc.?

 

[stillwaters]

Stillwaters I'll happily be corrected if i have lost the plot but i don't think you are right. The situation here is that Spanish VAT was meant to be paid by a Gib VAT agent, but he didn't pay and pocketed the money. So Spanish exchequer never got their VAT. It has nowt to do with UK VAT

Reference your second sentence, you are 100% wrong. There is no ability for UK HMRC to claim VAT from the innocent purchaser of a UK boat, or any subesequent secondhand owner, or to seize the boat, just becuase the original selling dealer of the boat failed to pay VAT to HMRC on the new-boat-sale transaction. None whatsoever.

As I said earlier, you have to be absolutely precise as to the facts before you can say what the VAT answer is, so of course if I have the facts wrong i'll happily be corrected.

Sorry jfm,I should have posted your quote with my previous post.
BTW,hope we can either agree soon or,at least,agree to not totally agree as I rather believe that not only are we on the same side,as it were,but both probably have better ways to use our time,anyway.

 

[fireball]

Reference your second sentence, you are 100% wrong. There is no ability for UK HMRC to claim VAT from the innocent purchaser of a UK boat, or any subesequent secondhand owner, or to seize the boat, just becuase the original selling dealer of the boat failed to pay VAT to HMRC on the new-boat-sale transaction. None whatsoever.

Thanks - I was going to ask for clarification on this - but you seem to have answered before I asked!

My understanding ... just sticking with transactions within the EU

If Buyer 1 purchased a new boat from Builder XYZ - including an element of VAT then the liability to pay the VAT element over to HMRC lies with Builder XYZ.
Buyer 1 can sell onto Buyer 2/3/4 etc and there will be no additional element of VAT involved (unless a buyer is VAT registered and sells it on - again, the VAT liability rests with the seller provided the vessel is sold inc VAT)

The only time HMRC can go after a boat is when a boat is imported and failed to payover import duty? ie Smuggled.

Has anyone ever had to provide the VAT Invoice for their vessel to anyone other than in the country of registration?

 

[stillwaters]

I'm being dim again, I dont see why folks believe that is 'odd' ....
seems logical and normal to me.

Isnt it exactly the same as an employer deducting PAYE and NI on an employee's behalf and then paying that over to HMRC? The employer is liable for that -- and any employee would be a bit miffed if HMRC came chasing him/her for what they had already had deducted from their wages rather than chasing the employer?

THe VAT registered body performs exactly the same function as the employer... no?

In the MBY example the original buyer apparently used a Spanish agent to handle the purchase. This has been done by many EU nationals over the years and quite often the boat never even went near Spain. It was actually used as a way of paying vat at a lower rate,mainly 16% in lieu of 17.5%.
The rules regarding responsibility for paying vat clearly state,however,that it is the buyers responsibilty to ensure it is paid and if the buyer uses an agent who fails to pay it then the onus still remains with the buyer to pay it.

 

[gjgm]

The rules regarding responsibility for paying vat clearly state,however,that it is the buyers responsibilty to ensure it is paid and if the buyer uses an agent who fails to pay it then the onus still remains with the buyer to pay it.

Agent here doesnt imply someone submitting VAT returns in the course of business, then (ie a dealer) but some third party? Otherwise surely this contradicts JFM previous reply that if you paid the dealer, VAT is paid, irrespective of whether it turns up at a tax office?