MBY Feb 2012 - Legal Aid (VAT) article

[Tranona]

However,maybe you might actually offer us a bottom line to this so we can all get on with something more productive. Perhaps you will answer two questions,where should the vat have eventually been paid by the boat's latest owner when the fraud came to light and against what value should this vat have been paid?
Look forward to finding out.

If I might come in here, having just re-read HMRC guidance on the subject. Based on the "facts" then it is clear the VAT on this boat is the responsibility of the state where the chargeable event occured. On the evidence presented so far it has to be Spain. There would seem to be no liability for any subsequent owner to pay any VAT to anybody as there has been no subsequent chargeable event. The fraud in Spain is solely the responsibility of the Spanish authorities. HMRC may of course be involved in providing information, but if the boat left the UK on either the NMT or Sailaway scheme then the entity responsible for accounting for VAT in the UK (builder or dealer) has accounted for it correctly.

It is also clear that the only situation where an individual can pay VAT directly to HMRC is when the individual is responsible for importing the a boat into the UK (EU). As you and Brian Legal say the boat never left the EU then there is no liability for VAT in the UK.

On the question of value, this only becomes relevant if it is an import where it might be based on the purchase price if recent or a valuation. Nothing magic about that in principle, although valuation may be subject to negotiation.

If it is not an import then it is up to the Spanish authorities to pursue the person responsible for the fraud for the amount that was due at the time of the transaction.

No doubt John will correct me if I am wrong.

 

[jfm]

However,maybe you might actually offer us a bottom line to this so we can all get on with something more productive. Perhaps you will answer two questions,where should the vat have eventually been paid by the boat's latest owner when the fraud came to light and against what value should this vat have been paid?
Look forward to finding out.

You really are quite hard work, and certainly could be doing something more productive than what you're currently doing, but I'll happily answer those two questions:

1 if the boat was exported from UK on the Sailaway Scheme
(a) No VAT is payable by the latest owner in either Spain or the UK. (There is a actually a law allowing UK HMRC to assess him, the old sec 30(10) VATA1984 but HMRC are on clear public record that they will not use their power to assess in these circs, so we can ignore that problem)
(b) Not applicable

As an additional comment, the very first owner of the boat owes UK VAT on the original new price of the boat plus penalties and interest and will if he is good narrowly escape jail. Depending on the detail, Brian Legal might be required to whistleblow under POC/Money Laundering. If the dealer who sold the boat new has not 100% followed the sailaway scheme rules they will be assessed for the VAT by UK HMRC iso the original owner but that is unlikely as most dealers knew how to do the scheme

2. If the boat was an NMT shipment UK-spain(a) VAT is payable by the guy who bought the boat when new, and it is payable to the Spanish exchequer if the NMT conditions apply, and if he has absconded then the Spainsh have a charge over the boat so the spanish tax becomes de facto the problem of the current owner, if the boat is physically in Spain (and not if it isn't).
(b) The tax is computed on the original new price of the boat, not the current value

3. If the facts are something other than Sailaway or NMT then the answer will be different

As I've answered your questions, would you mind coming back to me on that blue and white van conundrum please?

 

[jfm]

If I might come in here, having just re-read HMRC guidance on the subject. Based on the "facts" then it is clear the VAT on this boat is the responsibility of the state where the chargeable event occured. On the evidence presented so far it has to be Spain. There would seem to be no liability for any subsequent owner to pay any VAT to anybody as there has been no subsequent chargeable event. The fraud in Spain is solely the responsibility of the Spanish authorities. HMRC may of course be involved in providing information, but if the boat left the UK on either the NMT or Sailaway scheme then the entity responsible for accounting for VAT in the UK (builder or dealer) has accounted for it correctly.

It is also clear that the only situation where an individual can pay VAT directly to HMRC is when the individual is responsible for importing the a boat into the UK (EU). As you and Brian Legal say the boat never left the EU then there is no liability for VAT in the UK.

On the question of value, this only becomes relevant if it is an import where it might be based on the purchase price if recent or a valuation. Nothing magic about that in principle, although valuation may be subject to negotiation.

If it is not an import then it is up to the Spanish authorities to pursue the person responsible for the fraud for the amount that was due at the time of the transaction.

No doubt John will correct me if I am wrong.

Tranona your first para isn't right. If it was a sailaway a fundamental condition is that the first owner (retail customer) took physical delivery in UK and undertook to export it quickly from EU. As the boat went to spain which is EU he breached the Sailaway rules thus triggering UK not Spanish VAT. The chargeable event is the original retail purchase and delivery in the UK. It has to be retial becuase trade could never get Sailaway. You're then correct in saying that no subsequent owner has any VAT liability (other than a theoretical sec 30(10) UK liability but HMRC are firm they will not use that power in this type of case)

2nd and 3rd paras - agreed.

4th para is only relevant if there is an unpaid Spanish VAT liability, which there could be if it was NMT or was actually imported Gib--> Spain but not if it was Sailaway

We're both having to speculate on the facts though which as you know is barmy

 

[Brian Legal]

VAT

Thanks guys.

Just wanted to round this up from my perspective, having got you all going in the first place.

The article was by its nature very short and you have expanded upon it in good style - much more than my 750 words!

In this case the VAT was paid in England, extinguishing the owner's VAT liability and providing him with a boat that could be sold VAT paid. It did not mean that he still owed VAT in Spain on the new purchse price so his personal liability in the UK and Spain was extinguished. Someone mentioned that the Spanish do as they please and I agree with this comment. It follows from, that although the VAT liability was extinguished, try explaining this to a Revenue official in Spain! Nevertheless, the owner had a boat that was VAT paid and could show this to a Revenue official in any country.

If this situatiion arises again you have to speak to HMRC on an individual basis because they (believe it or not) can be quite awkward about taking your money. They have to have a "chargeable event" in order for VAT liability to arise and will then probably treat the boat as imported, although it has actually been in the EU all the time.

HMRC will then charge VAT on its current market value. This is usually the sale price - unless this is artificially low. If a dispute were to arise you would have to convince them about the current market value.

This is not an uncomon scenario but more commonly arises, not through fraud but when the VAT documents have been lost.

If there are any other hot topics I would like to pop up occasionally.

What about the 24m / commercial endorsement issue?

Best wishes

Brian

 

[benjenbav]

I read the article again this morning and, imho, the issue which Brian L had was a client who couldn't sell his boat because the would-be buyer perceived that there was such a thing as a VAT paid boat, didn't accept that this was one and so wouldn't part with the hard-earned. The fraud back in the mists of time was the cause of the problem in much the same way as the assassination of Archduke Franz Ferdinand was the cause of WW1.

Brian then did a blindingly good job of finding a seller's breach in the contract between the person who sold to his client and as we legal types say, put the frighteners on that individual.

Brian then didn't have to get involved in the detail of the VAT legislation. I suspect that had he needed to, he might have sought advice from someone who deals with VAT all day and every day. I certainly would in similar circumstances. I would probably want to go to the sort of international consultancy which has 1,000 staff in the UK who don't do anything apart from advise on indirect tax. Mebbe the one whose name rhymes with deck-quoit.

Whatever, VAT is really a sideshow to the story, other than it does serve to illustrate the point that the law on "VAT and VAT paid boats" is not the same as the perception of the law.

And one thing which has come up in previous discussions on this subject on here is that it doesn't really matter how right you are if the only person in the market for your boat believes that black is white.

 

[stillwaters]

I read the article again this morning and, imho, the issue which Brian L had was a client who couldn't sell his boat because the would-be buyer perceived that there was such a thing as a VAT paid boat, didn't accept that this was one and so wouldn't part with the hard-earned. The fraud back in the mists of time was the cause of the problem in much the same way as the assassination of Archduke Franz Ferdinand was the cause of WW1.

Brian then did a blindingly good job of finding a seller's breach in the contract between the person who sold to his client and as we legal types say, put the frighteners on that individual.

Brian then didn't have to get involved in the detail of the VAT legislation. I suspect that had he needed to, he might have sought advice from someone who deals with VAT all day and every day. I certainly would in similar circumstances. I would probably want to go to the sort of international consultancy which has 1,000 staff in the UK who don't do anything apart from advise on indirect tax. Mebbe the one whose name rhymes with deck-quoit.

Whatever, VAT is really a sideshow to the story, other than it does serve to illustrate the point that the law on "VAT and VAT paid boats" is not the same as the perception of the law.

And one thing which has come up in previous discussions on this subject on here is that it doesn't really matter how right you are if the only person in the market for your boat believes that black is white.

Firstly,I hope this will be my final post on this matter because,at the risk of repeating myself,I only became involved because of having nearly been involved in what appeared to be something similar,myself, about 8 years ago. Apart from which,like me,everyone must be fed up with it by now. So jfm,this is also my response to the last response from you,only I have chosen the above post from benjenbav because,at long last,here is a viewpoint based on actuality rather than theory.Well done that man (or woman?).

At no time have I wished to usurp jfm's apparent position as this forum's vat guru.There is no doubt that he has a great deal of understanding of vat and maybe other taxation regulations,far more than I would ever wish to get bogged down with.However,during a lifetime of running businesses both inside and outside the UK,one of the things I have seen,time and time again,is that regulations are not an end in themselves but only a means to an end and the end result does not always come from a book. In fact as the tax adviser I previously employed (not one of benjenbav's but on a par) over a possible but tricky boat purchase put it,you can split taxation into three parts,regulation,interpretation and application but all that finally matters is its application.This apparently,is non truer than in our world of boating where the application of regulations can vary considerably not only across the EU but in different regions of the same country.As the people who actually deal with these matters at the coal-face put it,whilst the regulations are black and white,often the resolutions are anything but.
Anyway,bearing in mind that this was an actual case,I thought the answer to all of the speculation on this matter would be to find out more details including its final outcome ,after all,surely no amount of theory is as valuable as reality.

So,although the boat went to Spain,in order to keep the vat paid to him by the original owner,the crooked handling agent obviously didn't declare the boat to Spanish Customs
(that would have been a stupid thing to do).Therefore,when HMRC were confronted with the situation they recognised that the original owner had done nothing wrong ,the only fraud had been committed by his agent but,because vat was still due and had to be accounted for,then it should be paid to them by the latest owner,who had bought it vat unpaid,against its value when it arrived back in the UK (not its new value,note). End of story,nothing to do with the Spanish,it never actually became theirs,no smuggling and,because it was a boat and EU customs hasn't yet managed to totally get its head around some of the headaches our floating friends create for them,the outcome was never likely to be the same as dealing with the more easily controlled day to day commodities such as tellies from Currys.

I agree with benjenbav,I think in the circumstances that Brian Taylor probably sorted the matter out as well as could be expected,even if maybe his article may have been a bit short on detail.
To jfm,can I say sorry if you feel I've given you hassle (I've had plenty as well,though). I think where we have differed on this is that whilst you are obviously a font of knowledge on vat,and maybe other taxation,I have spent most of my life where interpretation and application are all that finally matters.

 

[jfm]

Brian then did a blindingly good job ...

Brian then didn't have to get involved in the detail of the VAT legislation.

I'm amazed to read that from you BJB. I know you and know you are a smart guy, so 3 quick questions if I may:

1. Brian wrote that his client (David) "was now either liable for payment on the current value or had to sell it as non VAT paid". Can you think of any case BJB where, once a transaction has been done, someone has a CHOICE about whether to pay a tax?

2. And, while I know you are not a tax lawyer, does it ring true to you that when a non payment of VAT 6+ years ago is discovered, the back-tax liability (whether Spain or UK) now owed is VAT on the current boat value as opposed to the tax that should have been paid? Does that feel to you like a policy a parliament would enact?

3. This case involves a failure to pay Spanish tax caused by the dishonest agent. The Spanish exchequer was done out of 16% on a new Sunseeker. Does it ring true to you that that liability can be extinguished by paying VAT to HMRC in the UK?

As for Brian's very last sentence advising "contact the relevant tax authority to ensure their records confirm payment", how far will I get if I ask HMRC to confirm Curry's paid them the VAT on my particular TV?

You'll gather that I'm struggling with your "blindingly good job" score!

 

[jfm]

Firstly,I hope this will be my final post on this matter .

Stillwaters, yup, I think we might as well leave it there. We seem to be on different planets: you cannot see your statement "as the fraudulent agent acting on behalf of the first buyer hadn't paid over the vat,the boat would still be subject to vat but not at the original value but against the used value at the time. In other words,the longer one can get away without paying the vat ... the lower the vat due will become", the same way I do, and so we're miles apart

You beat your chest by telling us you have run a business but if you reflect on the weekend toys driven by folks on here you might figure out that others on here own/run businesses too. Thanks though for the er compliment that I know all about tax law but not about its application. Pity your guy who knows the law and its application couldn't be on this thread.

Out of curiosity, can you fill in your profile? I'd love to know your taste in boats. I can't deduce whether you're Sunseekery vs Nordhavn, or Med vs Northern Europe

 

[benjenbav]

I'm amazed to read that from you BJB. I know you and know you are a smart guy, so 3 quick questions if I may:

1. Brian wrote that his client (David) "was now either liable for payment on the current value or had to sell it as non VAT paid". Can you think of any case BJB where, once a transaction has been done, someone has a CHOICE about whether to pay a tax?

2. And, while I know you are not a tax lawyer, does it ring true to you that when a non payment of VAT 6+ years ago is discovered, the back-tax liability (whether Spain or UK) now owed is VAT on the current boat value as opposed to the tax that should have been paid? Does that feel to you like a policy a parliament would enact?

3. This case involves a failure to pay Spanish tax caused by the dishonest agent. The Spanish exchequer was done out of 16% on a new Sunseeker. Does it ring true to you that that liability can be extinguished by paying VAT to HMRC in the UK?

As for Brian's very last sentence advising "contact the relevant tax authority to ensure their records confirm payment", how far will I get if I ask HMRC to confirm Curry's paid them the VAT on my particular TV?

You'll gather that I'm struggling with your "blindingly good job" score!

Crossed wires. I'm not arguing tax. Just saying that Brian's case was about something else.

Brian's client was faced with having to sell his boat at a discount because his buyer was not comfortable with the paperwork. Brian was engaged to help recoup the likely loss. Brian managed to find a misrep or some other contractual breach on the part of the person who had sold the boat to Brian's client and sued (or threatened to) and got a favourable settlement.

Actually, now I have the article in front of me I see it was a 75% recovery so perhaps I should retract the adjective "blindingly". But, nevertheless, everyone was left with a sufficiently warm glow for the client not to be averse to Brian writing about it and for Brian to want to write about it.

Whether it was a good idea to use a UK breach of contract case as the starting point for an article about VAT principles and the effect of fraud in another jurisdiction is another matter.

When I first read it I thought it really wasn't of general interest because the facts were akin to the situation where I buy a TV from you which doesn't work. I try to sell it to Jimmy the Builder who won't touch it because it's faulty and I get my money back from you. Hardly a case of holding the front page. Lobbing (as Kelvin McKenzie might put it) a bit of fraud into the mix naturally adds to the gaiety of nations, of course.

As to the VAT analysis in the article, I'm very much not a tax lawyer as you know. But even I managed to answer your three numbered questions above as: No*, no and no. And for a bonus point I will take a wild stab at "nowhere" as the answer to the supplementary.

I think it would be extremely helpful if MBY republished the article which was in the magazine about 18 months ago which, I felt, looked at the two concerns which boaters tend to have, that is (1) can a douanier impound my boat and sling me in a cell for not having a bit of paper? and (2) without that bit of paper, will I lose out when I sell my boat? The law was explained then as it has been on this thread and, thanks to your clear comments I, for one, feel that bit more comfortable that I know where I stand.


* Actually, I can think of a case where, once a transaction has been done, someone has a CHOICE about whether to pay a tax - but it's a bit of a cheat (a) because it was a duty not a tax, (b) because it's gone now and (c) because it wasn't really a choice as much as a pragmatic position which was commonly adopted. I'm sure you know that I'm talking about stamp duty as it used to apply to leases of buildings which didn't require registration, in which respect it used to be common practice for many multiples and investors not to stamp the document until such time (if ever) as it needed to be litigated on, at which point the (non-onerous) penalty was paid and the document required for the litigation was stamped.

 

[jfm]

No not crossed wires. I understood your post and was really just appealing your "blindingly good job" evaluation; the VAT comments were intended as evidence for the appeal rather than things to debate in their own right.

Brian's client suffered a £10k haircut plus fees. Now without more facts we can't judge for sure whether that was a good outcome but when Brian starts with the 4 bits of er advice in my 1-2-3 plus the bonus question you gotta have some doubts. Anyway, I reckon Brian charged no VAT on his firm's invoice, in the hope that by the time HMRC find out a couple of years the advice will be worth less (partly due to this thread?), and he'll only have to account for VAT on the reduced value. Blinding!

Well remebered on the stamp duty defer-till-litigate. Ancient history but yup, virtual pint to you

I might still have that old MBY article on my laptop in Word if you want?

 

[MapisM]

I'd love to know your taste in boats. I can't deduce whether you're Sunseekery vs Nordhavn, or Med vs Northern Europe

+1.
My wild guess is rather for the first than the latter, on both accounts.

 

[Elessar]

As for Brian's very last sentence advising "contact the relevant tax authority to ensure their records confirm payment", how far will I get if I ask HMRC to confirm Curry's paid them the VAT on my particular TV?

I Paid UK VAT on a boat I imported. The document got destroyed.

I contacted HMRC with the following info:

My contact details
The boat details
The day I paid the tax
The amount I paid
The account I paid it from
The reference no I put on the payment
The account I paid it into

They still couldn't confirm I'd paid the tax.........

 

[Tranona]

They still couldn't confirm I'd paid the tax.........

No, they are quite clear -they don't keep any records, even in these circumstances where the payment is tied to the specific boat. The onus is on the person paying the tax to keep his record - and then only for 6 years according to HMRC advice. (Not sure that the last bit is actually the law, but that is what they say).

 

[MYAG]

I might still have that old MBY article on my laptop in Word if you want?

Smooth.

 

[benjenbav]

MYAG, I did actually know the authorship of the article when I mentioned it. But someone's gotta make the hard yards so that the fancy boys with clean shirts can carry the ball over the try line.

Anyway, what did you think about the 28M??

 

[jfm]

No, they are quite clear -they don't keep any records, even in these circumstances where the payment is tied to the specific boat. The onus is on the person paying the tax to keep his record - and then only for 6 years according to HMRC advice. (Not sure that the last bit is actually the law, but that is what they say).

The 6 year thing is in law but of course you're free to keep records beyond 6 years. If you imported a boat 10 years ago and HMRC now discover evidence of smuggling sufficient to assess you, you wouldn't get far far if your defence was "I don't need to prove it becuase the 6 year rule means I'm allowed to destroy the doc after 6 years, so I did".

 

[Tranona]

Yes, but guess it just illustrates the dissonance between reliance on commercial documentation as evidence and the practical difficulties for many of providing it - particularly from the past when much less importance was placed on having the document.

 

[stillwaters]

[QUOTE

You beat your chest by telling us you have run a business but if you reflect on the weekend toys driven by folks on here you might figure out that others on here own/run businesses too. Thanks though for the er compliment that I know all about tax law but not about its application. Pity your guy who knows the law and its application couldn't be on this thread.

Out of curiosity, can you fill in your profile? I'd love to know your taste in boats. I can't deduce whether you're Sunseekery vs Nordhavn, or Med vs Northern Europe[/QUOTE]



Come off it. As you well know,the only reason I made what was far from a chest-beating referral to business was because of your approach to demeaning me in order to win your argument. And,of course,I'm fully aware that some of the contributors to this thread have varying sizes of toys to play with,and good luck to them,just as I've been around in the real world long enough to know that even people with small toys might be just as wealthy or clever or,god forbid more so,as those with the very big ones,sometimes they just happen to prefer it that way. The fact that you think it valid to pigeonhole people by the type of boat or sort of boating they do does,however,appear to serve to highlight the difference that exists between your theoretical black & white world and mine that,some of the time,is more of a shade of grey and doesn't look to generalise,pre-judge or villify as a result.
Now,maybe,that's something to reflect on.

 

[stillwaters]

+1.
My wild guess is rather for the first than the latter, on both accounts.

Re the inane need to know or the relevance of my taste in boats and your unfathomable assumption that you know so much about me,can I suggest you read my previous post?

 

[jfm]

Come off it. As you well know,the only reason I made what was far from a chest-beating referral to business was because of your approach to demeaning me in order to win your argument. And,of course,I'm fully aware that some of the contributors to this thread have varying sizes of toys to play with,and good luck to them,just as I've been around in the real world long enough to know that even people with small toys might be just as wealthy or clever or,god forbid more so,as those with the very big ones,sometimes they just happen to prefer it that way. The fact that you think it valid to pigeonhole people by the type of boat or sort of boating they do does,however,appear to serve to highlight the difference that exists between your theoretical black & white world and mine that,some of the time,is more of a shade of grey and doesn't look to generalise,pre-judge or villify as a result.
Now,maybe,that's something to reflect on.

I apologise if I demaned you. I meant only to disgaree and put the record straight, not to demean you, but if i got it wrong and did demean you then I apologise. In my defence, but not to dilute the apology, you did write some remarkably bolloxy stuff though. You are also guilty of just avoiding points you can't answer and that's bad form. As in, you've ignored the request for back up on your "loads" claim and you haven't responded to my comments on your assertion (and Brian's) that if you fraudulently evade £100k VAT today and get found out by HMRC 5 years later when the boat has depreciated to 50% of its today value, you are allowed to pay only 50k VAT. A 50% reduction and a 5 year interest free credit period! Can you really not see the absirdity here? Are you for real? And Brian. I guess you'll just not reply to this line of questioning, but complain that I demean you

On your boat genre, I wasn't enquiring so as to "pigeonhole" you and it wasn't a "wealth" question. It was a genuine desire to know your style and location of boating, as a fellow boater. Mapism likewise. This is actually a boating forum and many folks like to know who they're talking to, in broad terms at least (not in wealth terms). "Sunseekery vs Nordhavn, or Med vs Northern Europe" isn't a money question