Proof Of VAT Paid

[Bergman]

Yes.
You are right of course.
I can see the logic for things like income tax. Someone living well beyond declared means, suspicious, lets do the bugger.

But VAT is different.

Anything sold from new in EU must have VAT paid. If it isn't C&E have issue with buyer/seller.

However, many years later all records of that transaction legally no longer need to be kept. Both parties may no longer exist. Therefor quite impossible to prove what took place.

I cannot see any moral liability on present owner of item (who may be many times removed) to pay VAT which was almost certainly paid previously simply because he is unable to produce a document whose status is undefined of which there is no legal duty on anyone to create or retain beyond (I think) 7 years.

This puts upon anyone who owns a product an onus to be able to prove that an illegal act did not take place may years ago between 2 parties who do not now exist and about which no information exists.


I know the law is an ass but this sounds beyond belief.
Is there any case law to back this up? I know there are tons of paper generated on VAT cases but has anyone actually tried to enforce this.

Has anyone tried to look at it through the Declaration of Human Rights legislation. Not only guilty until proven innocent but guilty until you prove someone else who may or may not exist innocent 20 years ago. - Nonsense.

The German case quoted would appear to be in contradiction to EDHR and in contradiction to rights of free travel through EU.

Why is this rule only applied to boats. I have bought and sold lots of 2nd hand motorbikes without any question of VAT arising. Why is that different?

This is complete burocratic facism

Come the revolution

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[jfm]

You are right Bergman.

This isn't a guilty/innocent case, it's only assessing how much tax to pay. A country cannot sensibly have a tax system based on "not liable to tax until proven by the state to be liable" because the costs of collection would be massive and we would all suffer.

But it's not as bad as you say. Two points:

1. For a taxman to assess tax and therefore force the boat owner to prove VAT was paid, the taxman must reasonably estimate that the tax is due. In English law that's not the highest hurdle, but still a hurdle. So the mere lack of VAT invoice on an old boat in the example you give is probably not enough to allow a tax assessment to be raised in the first place. Hence, I wouldn't worry too much

2. The VAT is the reponsibility of the seller or the importer. So if you buy a 2ndhand boat and it turns out that many years ago a buyer and seller illegally avoided the VAT, the VAT is their responsibility not yours. The VAT liability does not attach to the asset. Now, if you bort a 2nd hand boat and it was not VAT paid and the taxman had reason to suspect you had imported it, then it's your problem, but otherwise I dont see how it is a problem

Or am i missing something? I spect Observer knows about this

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[c_j]

I suppose what makes it different with boats is that If a dealer sold a boat to a customer in the Channel Islands they would not charge him VAT. If that same customer brought the boat to the UK and sold it to a customer unaware of its VAT status then that customer could pay for it but be unaware that he is still liable for the VAT. With Cars it is easy because they have to pass through a ferry port with Customs, and they get picked up.

I find it hard to believe that a UK dealer would not satisfy himself of the VAT status of a boat he was selling, and that can only really be done with sight of the original vat invoice. So it is either not VAT paid or they dont want you to know what was paid for it.

<hr width=100% size=1>CJ
cjs@stone.uk.com


<A target="_blank" HREF=http://www.stone.uk.com>http://www.stone.uk.com</A>

 

[BrendanS]

Re: German boat VAT

sumarised here with a legal viewpoint:

<A target="_blank" HREF=http://www.noonsite.com/Members/webmaster/R2001-05-30-1>click here</A>

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[Bergman]

Re: Ah!

Think I'm missing something now.

If "the taxman must reasonably estimate that the tax is due." then is there really a problem?

If boat was made in EU then "reasonable assumption" would be that VAT was paid. Otherwise VAT man would have prosecuted seller.

My concern was that the onus to prove VAT had been paid was upon a person who could not possibly do that. If onus upon VATman to prove not paid then much more satisfactory position.

You put it very succinctly "The VAT liability does not attach to the asset. "

If indeed that is the case then why is there a problem with boats?. That is precisely the position I have with my old motor bikes. Hence my question "why are boats different?"

Definately one for Observer, I await his Lordships judgement.

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[Bergman]

I follow the argument, based on fact that Channel Islands are not in EU.

I did try to be specific to limit my concerns to EU sold products.

So we can both be right!

My thoughts are that in your example the seller is commiting a criminal act in misrepresenting the boat.

Also I thought boats from Channel Islands had to clear customs on entering EU, but never been there so I may be wrong.

However you look at it the system is complete madness. However did we get ourselves tied up to this ship of fools.



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[Bergman]

Re: Speechless

Expletives deleted!

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[jfm]

Re: German boat VAT

Brendan, I saw that German ruling too. In practice not a problem. If your boat has been outside EU for 3 years or more, you simply would not make its first entry into the EU in German waters. In fact, you would be hard pushed to make your first port of entry Germany, unless going a long way round or travelling from Blatics or Russia or something! For most boaters, you would never sail to Germany.

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[jfm]

Re: Ah!

Bergman, no not quite. imho if a boat is made in UK there is not a reasonable assumption VAT has been paid. 90% of Fairline's production is exported. Quite a lot to EU, but also to Jersey etc. I was in Elizabeth marina in Jersey last Sunday and I reckon there were 30 Failines parked there, large Squadrons etc, plus large sunseekers and princesses. In fact there's a big dealer there.

You or I can buy an ex-VAT boat in Jersey, park it there for say 3 months, then quietly sail it to the UK. VATman knows this is possible

Frankly, no-one's gonna bother with an old motorboat but a £500k Fairline is different

I did not say VAT man has onus to prove VAT isn't paid. To raise an assessment he simply has to have reasonable ground to think it has been, say, imported from Jersey. That is a much less stringent standard than onus of proof

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[Bergman]

Re: Oh!

Right

Yes - I think

See the Jersey bit

But still unclear on grounds.

Are "reasonable grounds" same as "reasonable doubt" beyond which things must be proved.

Perhaps not

Maybe civil standard - balance of probabilities. Or maybe just a shrewd suspicion - or boredom

Only reason I raised the question is that I have lady VATman coming to see me week after next. I was going to ask her about it but perhaps, on reflection, not a good idea.

Thanks for all this

Really useful to talk to someone who understand this nonsense

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[Birdseye]

You can have the vat invoice and vat still be due. If, for example, you had bought a vat paid UK boat from another UK resident but done the deal where the boat was in (say) Turkey - not an unlikely scenario since there are large numbers of UK boats cruising the Med - then you would be due to pay vat a second time on re-import of the boat into the EC.

Thats why the bill of sale is as good a proof.

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[Observer]

Re: Ah!

Omigod! I'm not sure if I welcome being regarded as the fount of all wisdom on VAT. Some bits of VAT law are quite simple - others are horribly complicated and beyong the grasp of 99.9% of VAT officers never mind the innocent layman/businessman who is nevertheless expected to know all about it.

I can deal with some of the points raised reasonably easily.

1. In general, as jfm said, the responsiblity to account for tax due on the sale of goods is the seller's. So, if you buy a boat and pay VAT on it but the seller doesn't account for the tax collected, that's between him and C&E and not your problem.

2. The problems start to arise in the case of boats which are sold without having VAT paid on them on the supply to the first owner. Note that it doesn't matter whether that first owner recovered the VAT or not. If it was paid, the boat is "VAT paid" - period. The sale of boats free of VAT happens more often than you might think. For example, a boat purchased in the UK for export outside the EU. Or a boat purchased in the UK for export to another EU country. It is quite easy for VAT to be unpaid in these cases. And in these cases, I'm afraid the VAT liability does attach to the boat. So, if you (say) buy a boat in the UK from somebody who bought it tax free in Jersey, it is you who faces the VAT bill. You may or may not have a claim against the seller but that's a secondary point.

3. The rule about tax being due on a boat which has left the EU and then been re-imported also applies in the UK, in theory. In practice, it may be possible to get relief. Don't know much about this aspect.

4. Somebody made a comment about whether dealers satisfy themselves of VAT status. I'm sure that reputable dealers will take reasonable steps to verify VAT status but, unless the VAT man catches up while they have ownership, the VAT problem, if there is one, will pass to the next owner. What dealers are most concerned about is whether they might be liable for the tax themselves. When they buy a boat from a non-registered person, there is no input tax to recover. So, when they sell, they add a declaration to the invoice that input tax has not been recovered and only pay VAT on their profit margin (this is called the "margin scheme"). If they buy from a business, they have to either have a purchase invoice which says input tax has not been recovered (in which case they can sell on under the margin scheme) or they have a tax invoice and can recover the input tax, and sell on with liability to account for output tax on the full selling price. In the former case, if the boat is not actually VAT paid, they're not liable unless they've warranted it VAT paid to the purchaser. In the latter case, it becomes VAT paid by virtue of the tax invoice issued by the seller.

As jfm said, once C&E has raised an assessment, the onus is on the taxpayer to prove that it's wrong.



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[MedDreamer]

Re: Ah!

On point 2) What is the situation when a new non EU (eg US) boat is brought into the UK?

The importing dealer will have to pay VAT at the time of importing - Does that make it VAT paid? Is the dealer considered to have bought the boat? When he sells it on he will charge VAT on the full price (as he is a VAT registed company) which leaves them VAT neutral. If the purchaser is an individual he will not be able to claim back the VAT, so which paperwork proves VAT paid? The import document showing VAT paid by the dealer of the first "sale" invoice showing VAT paid by the first purchaser.

I'm getting headache now!!

<hr width=100% size=1>Martyn

 

[pheran]

Could this be the usual situation where the Brits turn themselves inside out trying to obey every EU law and Directive to the letter whilst the rest of Europe picks and chooses or shrugs the whole thing off with a smile? All I know is that when I bought a boat in Holland this year (from a broker that regularly ships to the UK, France, Belgium, Germany and Spain) I got what I wanted in terms of paper-work but was clearly being indulged. 'Yes Sir, we are used to you British and your obsession with VAT invoices- no-one else we deal with bothers to this extent. As long as title is established...'
And......'Of course, we find that it is the British buyers, not the British authorities, that are so concerned'
Are we frightened of shadows.......?

<hr width=100% size=1><font color=blue>A hangover is just the Wrath of Grapes</font color=blue>

 

[Observer]

Yes. I'm sure this has a lot do do with it. Everbody else around Europe takes a much more pragmatic view than we do. So the French, for example, facilitate VAT saving schemes because the SoF economy does so well from the large number of expensive yachts and wealthy owners.

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[Observer]

Re: Ah!

On point 2) What is the situation when a new non EU (eg US) boat is brought into the UK?

The importing dealer will have to pay VAT at the time of importing - Does that make it VAT paid?
<font color=red>No. If it has been bought as stock in trade then it cannot be VAT paid until it is "first entered into service" which means, for practical purposes, the date it was delivered to its first owner who buys otherwise than in the course of a trade of dealing in boats. VAT regulation is not explicit on this so the above is my conclusion but I think it's a fairly safe one.</font color=red>

Is the dealer considered to have bought the boat?
<font color=red> Not sure what the point of the question is. Whether he's bought it or not as a question of fact</font color=red>

When he sells it on he will charge VAT on the full price (as he is a VAT registed company) which leaves them VAT neutral.
<font color=red>If he sells in the UK and the boat is not for export he will charge and account for outpt tax. The sale can be zero rated, subject to certain conditions, if the boat will be exported (inside or outside the EU)</font color=red>

If the purchaser is an individual he will not be able to claim back the VAT, so which paperwork proves VAT paid? The import document showing VAT paid by the dealer of the first "sale" invoice showing VAT paid by the first purchaser.
<font color=red>Assuming the supply to the purchase is taxable in the UK, the dealer should issue a VAT invoice which separately shows amount of VAT charged. This will serve as proof of "VAT paid" status. The boat will then retain its VAT paid status subject to two exceptions: (i) the purchaser (even if not registered for VAT) can reclaim VAT if he sells the boat for export to another EU country whilst it remains a "new means of transport". Under common EU VAT law, the supply of NMT is taxable in the member state of destination so the original supply is superseded by the supply to the subsequent purchaser who takes it to another member state. He then has to declare the acquisition and pay VAT in that country; and (ii) if the boat is exported outside the EU and is re-imported more than 3 years later or by a different owner. The second condition is a UK C&E interpretation and does not apply in some other EU countries.

Whether the first purchaser (who brings the boat into service) recovers the VAT (because it's used in a business) or not doesn't affect the VAT paid status. The owner who has recovered VAT will be liable to account for any output tax on a subsequent sale and the general principle that it is the supplier's responsibility to account for output tax will apply.




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