Proof of VAT paid

[Philiz]

How important is it when considering a boat purchase?
Does anyone ever get challenged to provide proof to HM?
What type of proof is considered acceptable?

 

[Tranona]

How important is it when considering a boat purchase?
Does anyone ever get challenged to provide proof to HM?
What type of proof is considered acceptable?

Relatively unimportant if you are purchasing from a private EU citizen unless it has been privately imported into the EU or you have suspicions that it has been purchased through some kind of VAT reduction scheme.

No credible evidence that any private yachtsmen has ever been challenged by HMRC unless there is suspicion of a VAT offence (see above). In the normal course of events it is impossible for an individual can commit an offence unless they are VAT registered.

HMRC seem to think that an "original" VAT receipt of the sale from a trader to a private individual is the only acceptable evidence.

Suggest you go on the RYA site to get the "official" story - be prepared for a lot of reading.

Or hang about here as this topic comes up with monotonous regularity and the aswers are always broadly as above.

 

[gjgm]

yes,HMRC seem the least knowledgeable people on this topic...
If anything,and UK boating, the greatest risk is that your future buyer pulls out over some perceived problem.
If the boat was only a few years old, I d want to see the paperwork, but owners seem amazingly lax about keeping hold of it. You can usually get the original dealer to put something together for you.If its an older boat, I wouldnt personally bother.
Unfortunately, the question is usually "what constitutes proof".. not "do I need to prove anything"
Stories (rare) of problems with fellow European Custom bods... RYA struggled to actually trace any real life cases. And ,guessing, officials might look at the gin palace more than the runabout...

 

[Nick1150]

I am a customs broker in Greece. At least in Greece, which is an EC member, the proof of payment for the VAT, is the invoice if the purchase was made from a dealer, stating that the VAT is paid in the bottom of the invoice.

In case the purchase was made with a Bill of Sale between two persons, the Bill of Sale together with the invoice of the boat purchase from the previous owner(s) are THE evidence to the Customs Authorities or HMRC.

Hope that helps

Nick

 

[ari]

Nick, what happens if an owner does not have the invoice? What action is taken?

 

[nimbusgb]

Or if there are only photocopies of the original invoice the back of which had some stamps from the greek authorities which should have been copied but weren't and the authorities have destroyed thair copies ( 25 years old )

what a mess this system is!

 

[Tranona]

Or if there are only photocopies of the original invoice the back of which had some stamps from the greek authorities which should have been copied but weren't and the authorities have destroyed thair copies ( 25 years old )

what a mess this system is!

It is more bizarre than this. There is no requirement to keep any evidence longer than 6 years. There is no record of the "VAT invoice" other than the copy held by the seller. There is no record anywhere that a VAT payment is connected with any particular boat other than if the details are recorded on the invoice - and that only needs to be a description that shows the transaction is a chargeable event and VAT is payable. HMRC never see details of individual invoices unless there is an investigation. All they see is an account from the trader showing the total VAT collected for the period minus the VAT amount claimed for inputs.

Once the original purchaser (if a private individual) sells the boat to another private individual VAT becomes irrelevant as that, and any subsequent sales are not chargeable events.

So if you bought your boat from a private individual there is no need to "prove" anything about VAT.


BTW in the case of Greece there are no "stamps" in relation to VAT - just a normal receipt from the trader who sold you the boat. As in the UK there is no record or copy of this other than with the trader. There are, however plenty of stamps on the Bill of Sale and any documents relating to registration.

The confusion arises in part because HMRC would like to see VAT on boats as an asset tax (which it is not). Hardly surprising because the assets can be very high value (and so the VAT is also large) and the temptation to avoid it is powerful - witness the number of "schemes" largely aimed at wealthy people who tend to but very expensive MOBOs.

 

[Nick1150]

Nick, what happens if an owner does not have the invoice? What action is taken?

Hi,

In fact the right way is for the owner not to have an original invoice of the yacht purchase. This is because the original invoice is held in the Port Authorities when the boat is registered and gets its flag and numbers. The best scenario is for the owner to have a verified by the authorities (stamped and signed) copy of the invoice. In that case there is no problem to prove that VAT is paid to the autorities

The problem occurs when the owner does not have anything. In that case the owner has to apply an inquiry to the local port authorities, asking for a verified copy of the invoice. If the invoice is dated more than 6 years, after when the authorities do not keep records, then the authorities give a written verification that the VAT is paid or not, and states that its records are destroyed. With that document one can prove again that VAT is paid or not.

Those are the two ways to do it

Hope that helps

PS. This is the common practise in Greece, but I know that this also exists in other EC countries too.

 

[ari]

Many thanks for that Nick.

I'm still not quite understanding of the procedure though.

Say I buy a secondhand boat, I've got a Bill of Sale from the previous owner but no proof that the VAT is paid at all.

I sail into your harbour, you come onboard and inspect my paperwork and you ask if I have proof of VAT paid status.

I say no, nothing at all.

Then what happens?

 

[Tranona]

The difference in Greece (and many other countries) is that registration is compulsory, whereas in the UK it is not, so there is no mechanism for recording that VAT has been paid on a specific boat in the UK.

I bought my boat in Greece from a Greek company. I have a VAT receipt for the transaction, which somewhat confusingly only identifies the boat by its now defunct Greek registration number and name, not its HIN. The Bill of Sale does however list the registration number (as it was when the Greek company owned it) and the HIN, so it is possible to connect the invoice with my boat. I also have a formal document from the Greek registry transferring ownership to me and removing the boat from the Greek register (with lots of stamps!)

I have never been asked for the VAT receipt only the SSR, Insurance and Bill of Sale.

If and when I sell the boat I shall of course pass all the documentation on, but the VAT receipt is completely irrelevant for the purchaser as he has no responsiblity for VAT. Neither have I, even for my purchase - the responsibility for accounting for the VAT rests with the Greek company. All my receipt shows is that I paid him a sum equivalent to the VAT. He may of course have pocketed it and not passed it on to the authorities. It could actually happen that no VAT was paid because in the reporting period his VAT input may have exceeded the payments he received! However, so long as he has kept his records in order no offence has been committed.

 

[ari]

Thank you. But it still leaves us with the question, if I sail into a Greek port (or want to register my boat in Greece) and I have no proof that the boat is VAT paid, what happens next?

 

[Hurricane]

Many thanks for that Nick.

I'm still not quite understanding of the procedure though.

Say I buy a secondhand boat, I've got a Bill of Sale from the previous owner but no proof that the VAT is paid at all.

I sail into your harbour, you come onboard and inspect my paperwork and you ask if I have proof of VAT paid status.

I say no, nothing at all.

Then what happens?

We've been here lots of times over the last few months.

The important thing to remember is that VAT is a tax on a transaction.
VAT is only relevant in this context when a boat passes for the first time from a commercial organisation that is registered for VAT to a private individual who is not registered for VAT.
If you buy a boat from a private individual, who is not (normally) registered for VAT then he cant charge you VAT. If it is a private transaction, VAT will have been paid sometime in the past. The important thing is that if you are buying from a private individual, you are not liable to any VAT.

There is an exception - if your transaction is carried outside the EU - then you will be liable to VAT if you bring the boat back into the EU.

Remember - there is no such thing as a VAT PAID STATUS
VAT is only charged on a transaction and then only by someone or somebody who is registered for VAT.


As a BTW

Think about how it all works, VAT is just what it says a "Value Added Tax"
As a commercial organisation (registered for VAT) you would buy an item, pay VAT on it and then sell the item for more and, in doing so, you would charge VAT on your sale. Each VAT accounting period, the commercial organisation claims back VAT on its purchases and pays any VAT that it charges its customers to the revenue. The net result is (normally) a tax on the increased value (the company's proffit) that it has charged to its customers - hence its called a "Value Added Tax"

Now apply that logic to the arguement and you can easily see that there is no such thing as a VAT paid status.

 

[Tranona]

Thank you. But it still leaves us with the question, if I sail into a Greek port (or want to register my boat in Greece) and I have no proof that the boat is VAT paid, what happens next?

I you sail into a Greek port with a UK boat - nothing. As I said, just the normal documents. The Greek authorities are not interested in VAT as it is only the concern of UK HMRC

You cannot register your boat in Greece unless you are a Greek citizen or company.

If the boat is on the Greek register and you are buying it from a private citizen there is no VAT issue, but you need to deregister the boat. If you are buying from a Greek company like I did it is exactly as in the UK. You pay VAT on the contract price and get a receipt.

 

[ari]

So what we're saying is that all the advice about making sure you have proof of VAT, all the magazine articles that insist on it, the RYA, HM Customs (who had advice on their web site at one time about it), the finance companies who wouldn't finance a boat without it, the Dover Yacht Team who once sat in judgement as to whether a boat was deemed "VAT paid" until it was disbanded, the stories of boats impounded in France until the hapless owner stumped up some "VAT".

All wrong or untrue?

It's a non issue, buy without proof of VAT being paid in utter confidence that it can never ever come back on you?

 

[Nick1150]

Many thanks for that Nick.

I'm still not quite understanding of the procedure though.

Say I buy a secondhand boat, I've got a Bill of Sale from the previous owner but no proof that the VAT is paid at all.

I sail into your harbour, you come onboard and inspect my paperwork and you ask if I have proof of VAT paid status.

I say no, nothing at all.

Then what happens?

First of all when you buy the boat, your local authorities issue the new documentation of the boat. Those authorities have to check if the VAT is paid orn not, and have to state that in the documentation. The owner IS NOT RESPONSIBLE for that. The owner is only responsible to have all the documents required by the local authorities (according of course to the local rules and regulations) in order to conclude the sale. The new documentation should prove if the VAT is paid or not. At least the EC laws and regulations are cleared concerning the VAT issues.

According to the EC law, if the VAT is paid once in the EC, then the specific boat should not pay again its VAT, even if the specific boat is exported for a period of time outside EC. VAT therefore, for a specific product is paid ONLY ONCE in the EC. Thats clear and without any doubt.

Now if an officer stops and comes onboard he or she should know to see first the power of attorney and the rest of the documentation that states if the VAT is paid or not. Never the less, an officer will not look at VAT issues, but mostly at safety issues. His or hers job is not to check if the boat has paid the VAT.

Just for your info a Customs Broker is not a public servant, but usualy a person that acts as an intermediate between the client and the customs, so we do not come onboard. We provide custons services to the importer or exporter of the product

With that said, the VAT proof is either the original or the verified copy of the invoice. In any case though the documentation of the boat should state if the VAT is paid or not in the EC. Just have a look at your documents. They should state if the VAT is paid or not. In case it is not, and you have paid the VAT, you should have the VAT receipt of the VAT from the local Customs Authorities or the HMRC, depending on the country. One should go then to the local authorities and should ask to make a note in the power of attorney document stamped and signed. If the local authorities cannot do that then one should always have together with the rest of the documentation the VAT receipt.

Hope this helps

Nick



Hope that helps

 

[Tranona]

According to the EC law, if the VAT is paid once in the EC, then the specific boat should not pay again its VAT, even if the specific boat is exported for a period of time outside EC. VAT therefore, for a specific product is paid ONLY ONCE in the EC. Thats clear and without any doubt.

With that said, the VAT proof is either the original or the verified copy of the invoice. In any case though the documentation of the boat should state if the VAT is paid or not in the EC. Just have a look at your documents. They should state if the VAT is paid or not. In case it is not, and you have paid the VAT, you should have the VAT receipt of the VAT from the local Customs Authorities or the HMRC, depending on the country. One should go then to the local authorities and should ask to make a note in the power of attorney document stamped and signed. If the local authorities cannot do that then one should always have together with the rest of the documentation the VAT receipt.

Hope this helps

Nick



Hope that helps

On the first point that is not strictly correct. If as boat leaves the EU it can only return without paying VAT if it is the person who brought it back is the same as exported it. If the boat changes hands outside the EU then the person that imports it has to pay VAT.

It is possible for more than one VAT invoice to exist for the same boat. For example Dealer A sells a boat to Charter Company B. A issues a VAT invoice to B who treats this as an input to his business and therefore reclaims the VAT. B sells the boat at a later date to a private individual for an agreed sum and charges VAT which it accounts for in the normal way. There are now in existence two VAT invoices, both legitimate for different amounts for the same boat!

It is important to remember that VAT is a TRANSACTION tax, not a tax on a specific asset. So whether VAT is due is determined by the nature of the transaction, not the asset. So if the transaction is between two private people there is no VAT. If it is a VAT registered trader selling (to either another trader or a private individual) it is a chargeable event and VAT is due.

There is no requirement in law for a private individual to maintain any record of VAT paid. (Do you keep VAT receipts for everything you buy for your home?). For traders there is a 6 year limit for keeping records.

In the UK there is no requirement to register a boat, therefore no mechanism for "registering" that VAT has been paid. I know this is not the case in other countries where presentation of evidence of VAT is a condition of compulsory registration of the boat, but I think this could be challenged under EU VAT law.

There was a time when HMRC issued "certificates" for boats that were "deemed VAT paid" in the legislation, but stopped doing it, partly because it is uneccessary and partly I think because they realised that there is no definitive way of confirming VAT has been "Accounted for" - even if they see a receipt.

Nick - suggest you look on the RYA website. There is a big section on VAT which explains how it is applied in all its complexity!.

 

[ari]

First of all when you buy the boat, your local authorities issue the new documentation of the boat. Those authorities have to check if the VAT is paid orn not, and have to state that in the documentation. The owner IS NOT RESPONSIBLE for that. The owner is only responsible to have all the documents required by the local authorities (according of course to the local rules and regulations) in order to conclude the sale. The new documentation should prove if the VAT is paid or not. At least the EC laws and regulations are cleared concerning the VAT issues.

So what if the owner has bought the boat secondhand from the UK for instance, and turns up with it with no proof of VAT payment? How do your authorities check if the VAT is paid or not?

And if they cannot establish that it has been (because the boat is secondhand and there is no VAT paperwork) what happens next?

 

[ari]

On the first point that is not strictly correct. If as boat leaves the EU it can only return without paying VAT if it is the person who brought it back is the same as exported it. If the boat changes hands outside the EU then the person that imports it has to pay VAT.

It is possible for more than one VAT invoice to exist for the same boat. For example Dealer A sells a boat to Charter Company B. A issues a VAT invoice to B who treats this as an input to his business and therefore reclaims the VAT. B sells the boat at a later date to a private individual for an agreed sum and charges VAT which it accounts for in the normal way. There are now in existence two VAT invoices, both legitimate for different amounts for the same boat!

It is important to remember that VAT is a TRANSACTION tax, not a tax on a specific asset. So whether VAT is due is determined by the nature of the transaction, not the asset. So if the transaction is between two private people there is no VAT. If it is a VAT registered trader selling (to either another trader or a private individual) it is a chargeable event and VAT is due.

There is no requirement in law for a private individual to maintain any record of VAT paid. (Do you keep VAT receipts for everything you buy for your home?). For traders there is a 6 year limit for keeping records.

In the UK there is no requirement to register a boat, therefore no mechanism for "registering" that VAT has been paid. I know this is not the case in other countries where presentation of evidence of VAT is a condition of compulsory registration of the boat, but I think this could be challenged under EU VAT law.

There was a time when HMRC issued "certificates" for boats that were "deemed VAT paid" in the legislation, but stopped doing it, partly because it is uneccessary and partly I think because they realised that there is no definitive way of confirming VAT has been "Accounted for" - even if they see a receipt.

Nick - suggest you look on the RYA website. There is a big section on VAT which explains how it is applied in all its complexity!.

I agree (in principle) with all of this, so why is all the "official" advice (HM Customs, boating mags, the RYA, finance companies etc etc etc) telling us we must have proof of VAT paid status in the form of the original invoice?

 

[Nick1150]

On the first point that is not strictly correct. If as boat leaves the EU it can only return without paying VAT if it is the person who brought it back is the same as exported it. If the boat changes hands outside the EU then the person that imports it has to pay VAT.

It is possible for more than one VAT invoice to exist for the same boat. For example Dealer A sells a boat to Charter Company B. A issues a VAT invoice to B who treats this as an input to his business and therefore reclaims the VAT. B sells the boat at a later date to a private individual for an agreed sum and charges VAT which it accounts for in the normal way. There are now in existence two VAT invoices, both legitimate for different amounts for the same boat!

With all the respect the above is not correct...

Atleast in Greece, and I know the same exists in other countries too, according to the P2105/138/07-06-2000 law, VAT is paid only once for every boat. If a boat has paid once VAT in the EC, and the same boat is re-imported in the EC, even from a different owner, then this boat DOES NOT have to pay VAT again.

Please note that all of my comments are based on specific EC laws and regulations. This is my job remember ?

Friendly regards

Nick

 

[Nick1150]

So what if the owner has bought the boat secondhand from the UK for instance, and turns up with it with no proof of VAT payment? How do your authorities check if the VAT is paid or not?

And if they cannot establish that it has been (because the boat is secondhand and there is no VAT paperwork) what happens next?

As I said you have to apply to the local authorities to find evidence in the boat's files that prove if the VAT is paid or not.