Tax and chartering your boat

[mcanderson]

I have been looking at a second hand boat that the broker has had as a stock boat and it's currently coded for charter and they chartered it last year. If we bought the boat and decided to charter it, day charters with skipper only, we would earn about €1000 a day. The broker has suggested 10-15 days a year might be possible. We would obviously have to pay tax on the income, but what could I claim back as a legitimate expense?

The boat is in France we are in the UK and so it would be available for over 300 days a year as we tend to go down for 2 x 2 week breaks in May and Sep as well as one weekend a month in between.

The HMRC page on boats isn't very helpful as it tends to talk about VAT more. The boat is VAT paid and I'm not interested in changing that.

As ever thanks.

 

[Lon nan Gruagach]

The tax office have tables for % leisure vs business use and would expect the same to apply to purchase cost (and so tax to be claimed back).
If, on the other hand you can present a costed case of lesiure vs business use that is resonable they will go with that.
You can claim purchase cost, annual and spot maintainance (both at leisure vs business %) and full running costs when chartering.

The really funny bit comes when you buy fuel.
You may use red diesel for charter use, but not domestic, you need pink diesel, an agreed (with HMRC) ratio of red to road diesel shoiuld be in your tanks.

 

[Nick_H]

It depends if you start a charter company or run it as a sole trader. Assuming the latter, which is more usual and probably more beneficial, then as Dougal says you will have to proportion your general costs between personal and charter use, normally done as a ratio of days used, but you only need to class it as a private use day if you go to sea.

Any specific charter costs such as coding fees, extra insurance premiums, crew costs etc. can be deducted entirely

You can claim capital allowances on the purchase cost in the same ratio of private to charter use, and can take advantage of any writing down incentives aimed at start ups. As a result it's not unusual to report a loss which you can then offset against tax paid on other income, which is why it's potentially beneficial to run it as a sole trader, especially if you're a high rate taxpayer. This can catch up with you when you sell though, if you sell at a higher price than the written down value.

I've done all this for the last 5 years, so I'm happy to send you copies of my latest returns by way of example if you're seriously interested in chartering. I've also had an HMRC investigation with no issues raised, so I know all this is right.

There is some other relevant stuff to know about chartering your boat in SoF, but it's not of general interest, so I can pm you if you get close to a purchase.

 

[mcanderson]

Thanks. PM sent.