Sailing in Spain with a Guernsey registered boat.

[craw4d2003]

Hi
We are planning on sailing our boat back to Spain this summer. The question we have is our boat is Guernsey registered and we haven't had to pay import duty whilst living in uk, are we safe to travel through the med without having paid vat anywhere on her. We are trying to get an answer here in UK and are getting mixed messages. I understand that we could only stay in Spain 183 days without having to import her, but if we then moved onto say France or Portugal are we in danger of being fined or having our boat seized because we haven't got that piece of paper? We are currently trying to sell our boat here in Uk, it's a 50' Colvic Victor without any success so far so our plan is to sail to Spain and hopefully have more luck selling her there. Any information would be gratefully received.

 

[macd]

Where are you resident? That's what counts so far as VAT is concerned.
If you're resident in the EU, VAT should already have paid - by the sound of it, by you if you imported her to the EU.

If you are resident outside the EU area, then you are eligible for Temporary Importation of the vessel to the EU for up to 18months.

The flag your boat wears is irrelevant, except to the extent that it might invite more careful scrutiny, and might be taken into consideration were your country of residence in some way ambiguous.

 

[Tranona]

You have not given enough information about the history and current status of the boat, nor yourself to give any real advice except the general principles that macd explains.

So, what year is the boat? If it was pre 1986, where was it in 1992?Is there any evidence that VAT was paid anywhere in the EU and has the boat spent any significant time outside the EU? If built after 1998 does the boat have a CE mark, or if it was home completed did the completer keep it for more than 5 years before selling? For you, where are you normally resident?

Depending on your answers there may well be further questions.

 

[craw4d2003]

The boat was commissioned in 1991, it was in Ibiza in 1992 and we bought it in 2006 from the owner that commissioned it. No we have no evidence of vat paid anywhere. We lived on the boat for 2 years in Ibiza after buying her and then sailed back to UK in 2008 where we have been living on her ever since. We are resident in UK and the boat is registered with Lloyds of London through Guernsey. We have just re registered for the next 10 years. As I stated we want to sell her but do not want to stay in UK any longer than we have to so thought we would have a better chance selling in Spain. After we arrived back in UK we received a letter from Customs and excise asking for copies of all our paperwork which we sent to them and have heard nothing from them since. We would really like to get to the bottom of this as it is potentially stopping our plans of going to Spain.

 

[craw4d2003]

We are resident in UK, see above answer to Tragona for other info on boat. Any information you can give us to help us clear this matter up would be greatly appreciated.

 

[macd]

I see your problem, craw4d.

It seems that the flag is an irrelevance, except that it puts you in the cross-hairs of any official with an axe to grind.
Am I right in inferring that you are the second owner? Are you able to contact the first owner, specifically to ask:
a) whether he has any knowledge of VAT being paid;
b) where and from whom he actually bought it. If he bought it within the EU from a purveyor of boats, it's difficult to see how VAT wasn't paid. If the company's still trading, they may have records useful to you ;
c) mainly out of interest, why is it Guernsey-flagged?

Do you have any particular reason to believe that selling the Colvic might be easier/more rewarding in Spain? I have to say that I have my doubts. But in any event, you'll want to get a handle on its VAT status for the sake of any buyer.

Tranona (no 'g') is pretty switched-on on matters VAT, by the way. You can rely on his opinions.

 

[craw4d2003]

Yes we are the second owners. The original owner was Swiss and he bought the hull directly from Colvic in Essex, he then took it to Switzerland and had it fitted out there, then moved it to Ibiza where we bought it from him. I am wondering if when he bought it VAT was paid then, but as Colvic have ceased trading I am unsure how to find the original invoice. The first owner registered it in Guernsey, we do not know his reasons why. We were hoping that as it's better sailing weather in Spain by going back to Ibiza where we lived for 7 years and have contacts there, we would have more luck selling her, but in any case it's a nicer place and with better weather than living here in uk.

 

[macd]

I can only speculate, craw4d, but I suspect the original owner bought the bought from Colvic VAT-free, then chose the Guernsey flag with the presumption that it meant he still did not have to pay VAT after berthing it in the EU. Switzerland does have VAT, at a very low rate, but is not part of the EU VAT area. It may be that the original purchaser paid taxes in his home country, but I doubt that helps you. Can you ask him what happened?

One of the many inconsistencies of VAT is that liability seems to last for ever, but records need be kept for only five (or is it seven?) years. Colvic may have chucked them out, anyway.

 

[craw4d2003]

It's unlikely that we can contact him after all this time, assuming he's still alive. Why would customs and excise not notify us if tax was due on it? We've been here 9 years now and after their initial contact asking for all our paperwork, they have never been in touch since.

 

[macd]

Why would customs and excise not notify us if tax was due on it? We've been here 9 years now and after their initial contact asking for all our paperwork, they have never been in touch since.

No idea, except that it would have been incumbent upon you to notify them, not the other way round - but then you evidently weren't aware there was anything of interest to them. As for the reasons for their initial approach and subsequent silence, one can only guess.

Can you remember what the original ad said?: it's usual to declare 'tax paid' or 'tax not paid'.

 

[craw4d2003]

No idea, we have decided to stay here and sell our boat and have dropped the price to reflect its tax status..

 

[macd]

No idea, we have decided to stay here and sell our boat and have dropped the price to reflect its tax status..

I'm not sure that's wise. Assuming your ad describes the boat's status as 'VAT not paid', you are publicising the fact that it's illegal. And, if VAT is indeed not paid, as the importer you are the offender.

Were it to be sold, then how does the new owner pay VAT? And what does he say on contacting the VAT man? It actually isn't easy for a private individual to pay VAT on an item which has not incurred a VATable event, and buying from you would not in the normal course of things be a VATable event. That event, it seems, was your 'importing' the boat to the EU when you purchased it from a non-EU resident. (In which case, any VAT was due to Spain.)

Of course it may all go swimmingly well. But I really would take expert advice on this. From what you describe of your past dealings with the VAT authorities, it may even be that they do regard it as VAT-paid,in which case you'd be a happy bunny.

Do tread carefully.

 

[Tranona]

Your additional information helps close off some issues but inevitably opens others.

With a "home" completed boat - that is one where no single professional builder built it, the VAT record would be the complete collection of all VAT invoices for materials and labour (or at least the major bits - hull, engine spars etc) and they would remain with the boat's papers. Unfortunately in the period this boat was built not much attention was paid to such administrative tasks!

However, this boat was built in Switzerland so all that is irrelevant from the EU point of view. What I suspect happened is the completed boat was shipped to Spain under the temporary importation rules, quite legal for a Swiss resident. It would not be difficult to keep it for a longish period in this state, although early 90's to 2006 suggests that some of that time it would not be legal.

So, at some point the owner would have been faced with the choice of importing the boat into the EU and paying VAT plus probably matriculation. The very latest this could have happened would have been when you bought the boat as it would have been illegal for him to sell without importing unless you were removing the boat from the EU. It is not your responsibility to pay - but his, and if he had paid there would be documentary evidence from the Spanish customs which remains with the boat - and their customs would keep a copy. If you do not have this the boat is potentially illegally in the EU. There is a possibility that you can trace the transaction with Spanish customs, but this would be a long shot and probably open a can of worms you would rather keep closed.

Fast forward to now. You have sent the documents you have to HMRC, presumably lacking any VAT documents. They will not be in the least interested because it is nothing to do with them, but the responsibility of Spanish customs as the "chargeable event" took place in Spain. They would only get involved if Spain asked for assistance in investigating a VAT fraud.

Our VAT record keeping system is different from Spain in that the only evidence acceptable is the commercial invoice from the supplier or an HMRC receipt for a private import. HMRC do not keep any record of any VAT payments for yachts even where the payment is direct to them, so the buyer is responsible for keeping the evidence.

Where does that leave you? in a bit of limbo. Your boat is almost certainly in the EU illegally, but in reality it is doubtful if you will ever be challenged, at least in the UK. There is no way you can pay VAT because there has been no chargeable event in the UK - and even if you sell it here to a private individual that is exempt. It would be unwise to take it to Spain as the chances of falling foul of officialdom are much higher, particularly with its non EU flag (not a legal problem, but perception).

Problem is buyers may see issues that don't in reality exist, and in addition may be fearful of what might happen post Brexit, particularly if they want to cruise abroad - quite likely given the nature of the boat. On the other hand they may be very relaxed about it and accept there may be some risk. It is up to them to make their own assessment. You are not doing anything illegal, although you should be wary of misrepresenting the situation. The unpaid VAT is still the responsibility of the person who sold you the boat, but VAT law (at least in the UK) does allow it to "follow the boat", but the chances of Spanish customs taking any action after so long and the boat not being in Spain are close to zero.

The key thing is that you (presumably) have legal title through a Bill of Sale which hopefully will say that the title is passed free of any charges which will give some assurance to the buyer.

Hope this is of some help.

Just to add a little bit more to this since I penned it last night. Probably a good idea to ditch the Guernsey registration. Other than making it easier to borrow against the boat (probably irrelevant) it does little and will always raise eyebrows when cruising in Europe as it is not EU and associated with "tax dodging". Suggest you re-register on the UK register, preferably Part 1 for which you will need a survey, but otherwise seem qualified. Then when you sell the transaction will have taken place in UK and the boat will just look like another old UK boat. Use the proper MCA Bill of Sale which will be the evidence that the transaction took place in UK and this will reduce or even eliminate the chance of foreign customs asking questions for the reason explained earlier. Does not change the fact that VAT has probably not been paid, but hides it pretty well.

 

[doug748]

As you now want to sell the boat, I would re-open the dialogue with Customs and Excise. As suggested, I might also take professional advice first.
The case for the defence says you took poor advice in 2006, it's understandable, a Brit living in Spain, local broker, Swiss vendor, it happens. Doing the right thing in 2008 still just about puts you on the moral high ground.
You can't really expect any prospective buyer to fall in with any schemes for glossing over the boat's history unless your selling price is on the floor.

 

[Tranona]

As you now want to sell the boat, I would re-open the dialogue with Customs and Excise. As suggested, I might also take professional advice first.

Afraid that would be a waste of time. HMRC have no interest. As I explained the chargeable event occurred in Spain so is the responsibility of Spanish customs. On the information given no chargeable event has taken place in the UK, so why would HMRC be interested? If you could get any comment from them, it would be along the lines of directing you to Spanish customs.

In reality the OP is in no different position from hundreds, probably thousands of UK boat owners of older (and newer!) boats who have no evidence that VAT has been paid. It is not an offence not to have the evidence, nor is it illegal to buy and sell used boats (like any other used goods) without evidence. The only thing that is different about boats is that the dreaded EU insists that boats moving between states should be able to to show that VAT has been paid. Unfortunately there is a dissonance between the Directive and the law as they "forgot" to say HOW the system would work. So we have to live with badly worded and unworkable legislation.

Does not stop the buying and selling of boats as most people are pragmatic about the problems and just ignore them.

 

[doug748]

Afraid that would be a waste of time. HMRC have no interest. As I explained the chargeable event occurred in Spain so is the responsibility of Spanish customs. On the information given no chargeable event has taken place in the UK, so why would HMRC be interested? If you could get any comment from them, it would be along the lines of directing you to Spanish customs.

In reality the OP is in no different position from hundreds, probably thousands of UK boat owners of older (and newer!) boats who have no evidence that VAT has been paid. It is not an offence not to have the evidence, nor is it illegal to buy and sell used boats (like any other used goods) without evidence. The only thing that is different about boats is that the dreaded EU insists that boats moving between states should be able to to show that VAT has been paid. Unfortunately there is a dissonance between the Directive and the law as they "forgot" to say HOW the system would work. So we have to live with badly worded and unworkable legislation.

Does not stop the buying and selling of boats as most people are pragmatic about the problems and just ignore them.

It's ticklish.

The boat lacks documentation and there may be an unpaid VAT liability.
Most boats lacking documentation have no underlying VAT problem.

To try and sell the former as if it is the latter, puts a vendor in a possible fix.

If UK Customs & E have no claim, it is in the OP's, slight, interest for them to say so.

 

[Tranona]

It's ticklish.

The boat lacks documentation and there may be an unpaid VAT liability.
Most boats lacking documentation have no underlying VAT problem.

To try and sell the former as if it is the latter, puts a vendor in a possible fix.

If UK Customs & E have no claim, it is in the OP's, slight, interest for them to say so.

But, they won't - as the OP has already said. No response. While in the early post 1992 days they did have some "expertise" and offer advice, this was because most of the issues then were to do with the transition arrangements. However they quickly discovered that the law was so badly written, particularly in relation to the potential for further potential VAT liability if a boat ever leaves the EU, that they stopped giving advice.

You have to remember that VAT is not an asset tax, that is not a one off tax on the ownership of the boat, but a tax on transactions involving the boat. It relies (in the UK) on a paperwork trail that has only one relevant piece of paper, that is the original VAT receipt from the first transaction from a trader to a consumer, or an HMRC receipt for a private import. There is no requirement to have a secondary record of either of these that can be traced to the boat.

No wonder there is an element of uncertainty surrounding many boats.

You are right, the owner has a potential problem as I explained, but how this affects his sale will depend on the attitude of potential buyers. The shame is that there is no practical way he can change the situation. The error occurred in 2006 when he bought the boat.