Prooving VAT Paid on a 1987 yacht

[Tintin]

This has probably been done to death, but as ever the forum search defeats me.

I may be about to buy a 1987 yacht for a good price.

I am content that the vendor owns the boat.

But the ownership trail is not complete re paperwork

There is no original bill of sale showing VAT paid.

So do I have a problem, or can I overcome it somehow?

If so, how?

Mucho appreciation for quick answers on this one pls.

 

[Tranona]

No. there is no way of "proving" VAT payment without the original VAT invoice (not the Bill of Sale).

However, there is little need with an old boat like that to ever need to show any proof. Nobody is in the least bit interested and there is no way that you can ever be required to pay any VAT unless in the remote case that the boat was imported legally into the EU at some time in the past. Highly unlikely!

You will be in no different position from thousands of other boat owners who seem to get along just fine without "proof".

 

[Sharkx]

I was joint owner of a 2005 £45000 boat (now sold on) with just the bill of sale. Even the finance company weren't too fussed. Nobody cared. No problem selling it on either.

 

[maxi77]

Another one who had no problems with no proof of VAT. No one was interested though if you want to sell on to some EU nationals they do need proof to register locally. Didn't stop me selling overseas though

 

[superheat6k]

Use it as a stick to beat the price down then worry about the myriad other problems of owning a boat. Worked for me last purchase, then I obtained a copy from the manufacturers gratis after purchase. Good luck.

 

[Tranona]

Use it as a stick to beat the price down then worry about the myriad other problems of owning a boat. Worked for me last purchase, then I obtained a copy from the manufacturers gratis after purchase. Good luck.

No rational reason to reduce the price. The value is unchanged with or without the "proof" because there is not the remotest possibility there will ever be any liability for paying any tax. You can't get proof anyway unless you are lucky enough to find the original seller still in business and kept the record for 25 years (legal requirement is 6). Even then, still does not change the value.

He does not need any luck - except to hope the boat is as good as he thinks it is.

 

[alahol2]

Any word processor will knock up some 'official' headed paper for the original manufacturer. A little research will find the correct VAT number and rate of VAT prevailing at the time. Find someone with an old fashioned typewriter to fill in the details and get a 'Paid' stamp on it. Carry it round in your wallet/briefcase for a few months.

 

[jonic]

I know of one mid 80's boat which had some not very good documentation and the new owner was charged VAT on re-entry to the EU after a Caribbean cruise.

There was also a case this year of a high value pre 1985 British yacht being charged VAT by the French - despite HMRC making representation - but it did not have the right documentation, so VAT was levied.

I have had customer's yachts have finance either refused or VAT waivers added to the agreement by the finance houses, and just yesterday a client phoned me astonished to say he had been asked about VAT by the UK boarder agency whilst sitting on his yacht in a Solent marina not even having been anywhere, let alone crossing the channel.


Selling on can certainly become difficult, especially if the buyer requires finance.

We - and most professional brokers - will not take on boats without VAT papers and sell them as VAT paid.


For general information:

Don't forget, going in and out of the Channel Islands means leaving and re-entering the EU.

The Bil of Sale is not a VAT document.

You need an original invoice with a VAT number, reference to the vessel and amount accounted for.

or a Customs issued payment receipt

or the boat to have been deemed VAT paid.


More info here http://www.jryachts.com/vat-and-rcd


There are many boats without VAT papers and as boats age, the problem is getting larger. I attended a talk given by an HMRC VAT specialist recently and he is hopeful that the matter will be looked into and a solution found, but at the moment that is a long way off.

It is rare to have a problem but by no means beyond the realms of possibility.

 

[Tranona]

Don't disagree with the potential problems, but there is a world of difference between being asked for documentation and any negative consequences of not having it.

Boats returning from outside the EU are always potentially subject to VAT - with or without the original invoice - if they do not qualify for returned goods relief.

The reality is that unless you have the original receipt and the boat is not exempt then there is no way of getting any "proof" so you have to live with it. For the OP who is buying a (relatively) low value old boat that has a good history otherwise there is no risk at all. Even the potential problem with finance companies is unlikely to be real as the boat is probably too old and low value for any mortgage.

Of course it would be nice if all boats were required to have proof, but it has never been a legal requirement, nor, pre 1992 was there ever any intention that any proof would ever be required. Usual problem of EU inspired legislation which is long on intention and short on legal and practical foundations.

 

[Tintin]

Has anyone ever had any success getting copies of original invoices from Beneteau?

 

[Tranona]

Has anyone ever had any success getting copies of original invoices from Beneteau?

It won't be from Beneteau, but from the UK dealer. So you need to find out who sold the boat in the UK. Chances are they are long gone and there is only a requirement to keep paperwork for 6 years. In practice even this is a movable feast as if the firm goes out of business before the 6 years is up the paperwork may well disappear anyway!

Don't worry about it. So long as you can show you tried and you get a clean Bill of Sale using the RYA or the MCA model you have nothing to fear.

 

[jonic]

It won't be from Beneteau, but from the UK dealer. So you need to find out who sold the boat in the UK. Chances are they are long gone and there is only a requirement to keep paperwork for 6 years. In practice even this is a movable feast as if the firm goes out of business before the 6 years is up the paperwork may well disappear anyway!

Don't worry about it. So long as you can show you tried and you get a clean Bill of Sale using the RYA or the MCA model you have nothing to fear.

You can't say categorically he has nothing to fear.

The boat needs to be VAT paid and the onus is on him to prove it if challenged or when he comes to sell.

Due to age and value, customs here and abroad are highly unlikely target him, but if something else sparked a visit questions could be asked.

Wrong official on the wrong day....

In practice it probably won't happen.

But without some sort of evidence he takes a risk (however small that is perceived to be). Who knows it may have been sold outside the EU and brought back in, it may have been through a business and had a VAT reclaim with VAT not charged again on re-sale.


But Tranona is correct in that it is unlikely to come to the attention of an official or a finance house, so any risk is small.

 

[jwilson]

Who knows it may have been sold outside the EU and brought back in, it may have been through a business and had a VAT reclaim with VAT not charged again on re-sale.

But Tranona is correct in that it is unlikely to come to the attention of an official or a finance house, so any risk is small.

Agreed entirely, for example an immaculately preserved receipted invoice from the original UK Beneteau dealer need not be perfect proof of VAT status. The boat could have crossed to the US, been sold there to another Brit, with both seller and buyer putting their UK addresses on the Bill of Sale. Buyer then sails it back, and even if you had the original VAT document and a full paper trail of chain of ownership since new, you'd have an apparently perfectly documented VAT paid boat that actually was due to pay VAT - as it lost it's VAT paid status when sold outside the EU. There are various other ways for VAT paid status to be lost, even if you have the original receipt showing VAT paid.

In practice a mid-sized 25+ year old yacht with no VAT proof is very, very unlikely to ever have any problems with the lack of a bit of paper saying VAT was paid. The whole VAT thing on yachts is a can of worms, and one which HMRC is carefully avoiding opening. They used to issue VAT opinion status letters with a flimsy SAD88 form, but stopped doing so mid-90s perhaps as it got too much like hard work for no return.

HMRC can only charge you VAT if they can PROVE that VAT is due, and with 99.99% of old boats they cannot. Their own records only show that Bogstandard Boatbuilder Ltd. paid £xxxxx in VAT in 1987 - not which individual 1987 Bogstandard 35 yachts that money related to. Bogstandard was of course one of the many failed yachtbuilding companies in 1990.

 

[jonic]

Update

I have spoken to the OP and there is more to it for this one.

It does have a history which points to it not merely being a loss of documentation.

 

[Tintin]

Update

I have spoken to the OP and there is more to it for this one.

It does have a history which points to it not merely being a loss of documentation.

Thanks John - I fear it may be a mire, but every cloud has a silver lining. I smell discount.

 

[prv]

The boat needs to be VAT paid and the onus is on him to prove it if challenged

Is that the case?

Surely if HMRC want to bring a prosecution for unpaid VAT, they have to provide at least a shred of evidence that some might be due, rather than just saying "well, you can't prove it isn't"?

Pete

 

[Tranona]

Is that the case?

Surely if HMRC want to bring a prosecution for unpaid VAT, they have to provide at least a shred of evidence that some might be due, rather than just saying "well, you can't prove it isn't"?

Pete

It is a moot point. They would have to show that they believed that a chargeable event has occurred and that VAT has not been accounted for correctly. The obvious case is a privately imported boat or a boat that has changed hands outside the EU. So the chargeable event is the import (or re-import) into the EU and if that is the case the onus is on the importer to show that VAT has been paid, and the only evidence is the receipt from customs, who do not keep a copy.

What is unlikely to happen is just asking to see a receipt when the boat has been bought privately in the EU as the last transaction was not a chargeable event so no VAT is due. However if there was an import in the past that was illegal, the liability can follow the boat, but HMRC would probably have to go to court to enforce that charge on the boat. It is also possible for EU citizens to buy a new boat VAT free and take it abroad and it then becomes liable for VAT if it is brought back into the EU. There are other scenarios involving corporate ownership of a boat as a business asset and tax reducing leasing schemes (not in UK) where there may be potential liabilities, but most of these are way outside "normal" experience. There are also potential exemptions such as returned goods relief or returning resident relief which can mean a boat is imported legally free of VAT, but there needs to be the certificate from customs confirming the relief. So if as boat has a complex or incomplete history, particularly periods outside the EU, tread carefully.

If you read the HMRC FAQ sheet on the RYA site they make it quite clear that they are not able just to send somebody a bill just because they don't have a receipt. They can only collect VAT from individuals where there has been a transaction for which the individual is responsible for paying the tax.

However, it is clear that not every EU country enforces the rules in the same way, either because their law is different or through ignorance (see the thread on Liveaboard about Croatia as an example)

 

[jonic]

It is a moot point. They would have to show that they believed that a chargeable event has occurred and that VAT has not been accounted for correctly. The obvious case is a privately imported boat or a boat that has changed hands outside the EU. So the chargeable event is the import (or re-import) into the EU and if that is the case the onus is on the importer to show that VAT has been paid, and the only evidence is the receipt from customs, who do not keep a copy.

What is unlikely to happen is just asking to see a receipt when the boat has been bought privately in the EU as the last transaction was not a chargeable event so no VAT is due. However if there was an import in the past that was illegal, the liability can follow the boat, but HMRC would probably have to go to court to enforce that charge on the boat. It is also possible for EU citizens to buy a new boat VAT free and take it abroad and it then becomes liable for VAT if it is brought back into the EU. There are other scenarios involving corporate ownership of a boat as a business asset and tax reducing leasing schemes (not in UK) where there may be potential liabilities, but most of these are way outside "normal" experience. There are also potential exemptions such as returned goods relief or returning resident relief which can mean a boat is imported legally free of VAT, but there needs to be the certificate from customs confirming the relief. So if as boat has a complex or incomplete history, particularly periods outside the EU, tread carefully.

If you read the HMRC FAQ sheet on the RYA site they make it quite clear that they are not able just to send somebody a bill just because they don't have a receipt. They can only collect VAT from individuals where there has been a transaction for which the individual is responsible for paying the tax.

However, it is clear that not every EU country enforces the rules in the same way, either because their law is different or through ignorance (see the thread on Liveaboard about Croatia as an example)

Spot on.

Where I have heard of VAT being levied it has been an overseas official.

A couple of years ago it was announced member states could collect on behalf of other member states, which potentially took away the comfort of being able to produce a Bill of Sale and saying this is the responsibility of the UK. You can still call UK customs for help but the other member state can collect if they suspect a problem. And that HAS happened.

To reiterate - the powers are not exercised very often but the mechanism does exist.

Coming in and out of the EU or entering Ports used to receiving and checking non EU vessels raises the possibility of being asked.

It is more likely overseas than here.

Here a finance house is probably more of an issue!

 

[superheat6k]

No rational reason to reduce the price. The value is unchanged with or without the "proof" because there is not the remotest possibility there will ever be any liability for paying any tax. You can't get proof anyway unless you are lucky enough to find the original seller still in business and kept the record for 25 years (legal requirement is 6). Even then, still does not change the value.

He does not need any luck - except to hope the boat is as good as he thinks it is.

I would add that it is IMHO quite reasonable. It is for the seller to ensure he holds reasonable title, if not the value becomes subject to further negotiation, especially in today's buyer's market.

In my specific case at first viewing I specifically asked about title including original VAT status / documentation, and was advised full title was available, so my primary offer took due account of this as this was the broker's understanding. Also on this basis I instructed and paid surveyors, so having been misled I would have had grounds not only to cancel the contract but also to reclaim those fees. The broker was to say the least annoyed when the documentation presented was a pile of unsorted papers, with certain important items missing.

As it was this was taken into due account with my final offer, along with undisclosed defects from the survey.

My advice to any would be buyer is to establish, preferably in writing, what the title status is, including VAT status. If the sale is of significant value, e.g. above say £20k, then knowing what will be presented later could save a good deal of hassle later for both parties, and cost for buyer's fees can be reserved for a better purchase early on.

 

[jonic]

So if as boat has a complex or incomplete history, particularly periods outside the EU, tread carefully.

This is the important bit.

Add to that, ownership through a company or if used in a questionable charter business where VAT has been reclaimed and no VAT invoice has been issued by the company when the boat returned to private ownership.