Sorry to post another VAT question but....

[CalmSkipper]

I'm thinking of buying a boat that is 'VAT NOT PAID' for primarily business use. I'm not sue of how the VAT bit works so I'd be grateful for any comments or advice. I'm assuming

1. when I buy the boat, because the VAT is not paid I then have to pay it at 17.5% of the value of the boat
2. Having set up VAT registered company I then apply to recover the VAT
3. The REVENUE will haggle based on how much the boat is used for business use verses my own use
4. A rate will be agreed based on 3. and I can rover that percentage of the VAT I paid on the boat
5. I can also reclaim that percentage of VAT on income generated by the business and VAT paid on maintenance, spares etc
6. The Revenue will view any profit as taxable and tax me on it

Help gratefully received!!!!

 

[tudorsailor]

I have just bought a 2nd hand boat on which VAT had not been paid. I have set up a limited liability partnership and will put her in Mallorca to charter.

Your summary seems correct. Non-business use of the yacht will restrict the recovery of VAT over a five year period using the Lennartz mechanism. This works by apportioning VAT on a quarterly basis based on the % of private use. After 5 years, you could wind up the business and then own the boat privately. Then when you sell, the yacht is considered to have VAT paid. A bonus for me is that the interest I am paying on the loan is tax deductable against my othernon-charter income!

have been told I can reclaim the VAT once the yacht is fully coded and thereby shown to truly be a business. CAn't wait!

Hope this helps

TudorDoc

 

[pelicanpete]

If you indulge in any personal use of the vessel, you must invoice yourself at market value (i.e. charter it you yourself) and charge VAT (which is not recoverable in such circumstances).

 

[CalmSkipper]

Thank you - It's very helpful having those thoughts confirmed

 

[CalmSkipper]

I'm sure this is a silly question but just to be sure - what if I go for a boat that tax HAS already been paid on. I'm assuming it cannot be recovered by the next owner (me!)

 

[tudorsailor]

My understanding is that you cannot recover the vat aready paid, hence the attraction of a yacht that has vat yet to be paid. If you are going to charter the yacht, where will it be? Mine is going to Mallorca. There the rules are very strict. If the yacht is a "commercial vessel" and MCA coded, all use needs charter aggreement, even if used by the owner. I am putting my yacht with a company who will do the chartering. When I use it they will give me an agreement to keep on the yacht in case of inspection.

TudorDoc

PS Fancy chartering an Oyster 49 in Mallorca???

 

[julianspurr]

I bought a boat from a small (single boat) private charter company in UK and it was sold by broker as VAT recoverable as they (the owners) had recovered VAT when it was purchased new. They invoiced me for the net cost of the boat plus VAT which I paid and then they paid the VAT to Customs and Excise. I set myself up as a sole trader and became VAT registered and then tried to reclaim the VAT. My initial claim was refused but I wrote a letter saying that I intended to make the boat available for charter at all times and was not just trying to avoid paying VAT on a private boat which is what they now appear to assume. I then got a phone call from a VAT inspector to confirm what my plans were and they accepted my story but told me that I would have to pay VAT on any private use at market rate and that the boat should be advertised for charter or I should have some proof that the boat was a serious business if they ever inspected. Fortunately the boat has been out on charter a lot - probably 10-12 weekends for each of the last 3 seasons.
I can claim VAT on legitimate expenses such as berthing fees and repairs etc but as I am VAT registered I have to charge VAT to customers. The VAT charged to customers has to be paid to Customs and Excise.
It comes under voluntary registration for VAT because the income never reaches anywhere near the compulsory VAT registration figure. You are doing this because you believe that it is beneficial to be VAT registered.

Don't assume that you will get the VAT back as they they do see this as a potential scam when it is just a single boat(probably with good reason) but do appear to be open to argument.

As for making a profit - even with many charters it is more about just covering all the exhorbitant costs on the south coast.

Hope this helps.

Julian.