Tax paid status for EU purchased boat now on temporary licence

[ROBERTBS]

Hi, I wonder if anybody can help with this please..... I bought a EU tax paid boat in Mallorca just before the Brexit laws came into place around four years ago. In order not to pay tax I had her shipped back to UK and re registered her as a UK boat. Last year I shipped her back to Mallorca and cleared customs under a temporary licence. I know that I need to take her out of teh EU before 18 months expires, but was wondering if i need to actually do this as I have all the original purchase doccuments clearly showing tax was paid in the EU. Can she/is she technically still an EU gtax paid boat? Please help if you can as trying to avoid a trip to Algiers!!

 

[Tranona]

In theory you could using Returned Goods Relief however the time limit for that is nominally 3 years. It is up to local customs whether they extend that time for exceptional circumstances but would think unlikely. The withdrawal agreement clearly makes your boat UK VAT paid status and therefore only allowed in the EU under TA.

 

[jrudge]

The odds of being " caught" are very very low and then you could show the eu tax paid docs and unless you had a determined official they would be happy.

However .... when you come to sell it the buyer is ( or should ) want to understand its tax status and if on temp import they will want proof it has been exported every 18months so tax is not due.

If it is later determined by the authorities that tax is due it would fall on the new buyer.

A friend had a boat and its tax status came to light when he bought a berth in Mallorca and they officials wanted a lot of paperwork. I don't want to go into the details - it was not the same as this - but things can and do sometimes come to light.

You could also bring it back to the U.K. to sell it etc.

However the proper answer is yes you need to take it out every 18 months.

 

[ROBERTBS]

Thanks both. If I wanted to sell her in the EU, do you think I could re register her as a EU boat (as mentioned, I have all original invoices etc), do ou think she would be "tax paid" status? I would be surprised if HMRC came knowcking on my door in 18 months asking where she was, although you never know!

 

[DavidJ]

From my own experience (not the same as yours but similar) of buying new and paying tax in the UK, taking it shortly after to Spain and having proof of being in the EU on Dec 31st 2020 (which maintains its EU VAT status) I had difficulty in selling in Spain.
Unless your boat is something really special or really cheap then potential buyers won’t be (or in my case were not) interested in navigating through the peculiarities of post Brexit agreements.
Because I was the original exporter I could bring it back to the UK with no VAT to pay to resume my UK VAT paid status…….it sold in three weeks!

 

[Tranona]

The odds of being " caught" are very very low and then you could show the eu tax paid docs and unless you had a determined official they would be happy.

However .... when you come to sell it the buyer is ( or should ) want to understand its tax status and if on temp import they will want proof it has been exported every 18months so tax is not due.

If it is later determined by the authorities that tax is due it would fall on the new buyer.

A friend had a boat and its tax status came to light when he bought a berth in Mallorca and they officials wanted a lot of paperwork. I don't want to go into the details - it was not the same as this - but things can and do sometimes come to light.

You could also bring it back to the U.K. to sell it etc.

However the proper answer is yes you need to take it out every 18 months.

Sorry that is wrong. If the boat is sold in the EU or stays more than 18 months from entry VAT is payable by the owner based import as at the date of entry. Customs will determine the value at that date and should apply the VAT rate for the date.

The risk of getting caught are as you say low but trying to sell is just the point where you could be caught out by the buyer and/or broker finding the full history

 

[Tranona]

Thanks both. If I wanted to sell her in the EU, do you think I could re register her as a EU boat (as mentioned, I have all original invoices etc), do ou think she would be "tax paid" status? I would be surprised if HMRC came knowcking on my door in 18 months asking where she was, although you never know!

Registration is irrelevant to VAT except that to be eligible for TA it needs to be outside the EU. Changing to EU registration does not change its VAT status, except it then loses the TA concession,

 

[jrudge]

Sorry that is wrong. If the boat is sold in the EU or stays more than 18 months from entry VAT is payable by the owner based import as at the date of entry. Customs will determine the value at that date and should apply the VAT rate for the date.

The risk of getting caught are as you say low but trying to sell is just the point where you could be caught out by the buyer and/or broker finding the full history

It depends on when the issue arises.

Boat is sold and for whatever reason the issue comes to light 12 months later. The problem is that of the buyer not the seller. The boat is not tax paid. Tax needs paying and it is the current owner who will pay it.

Now the contract may have an indemnity and the buyer can try and claim off the seller who is in the U.K. but that is a separate thing.

The op is trying to fiddle the system. It might work or it might not. Officially I can't work.

 

[jfm]

It depends on when the issue arises.

Boat is sold and for whatever reason the issue comes to light 12 months later. The problem is that of the buyer not the seller. The boat is not tax paid. Tax needs paying and it is the current owner who will pay it.

Now the contract may have an indemnity and the buyer can try and claim off the seller who is in the U.K. but that is a separate thing.

The op is trying to fiddle the system. It might work or it might not. Officially I can't work.

J that isn’t correct. Tranona is correct.

The tax payable is primarily due by the first guy, who imported it at the start of the 18month period.

If that person fails to pay then in some countries the tax authorities have a statutory lien on the boat and then it becomes the buyer’s problem (but never the buye’rs obligation to pay), but only if the tax authorities choose to invoke their lien, which they may well not if the buyer is innocent.

Of course there can be quite a mess for a year or two, so none of this is nice for the buyer, but the primary tax obligor is always the “previous corner” in the scenario we’re discussing.

 

[jfm]

The odds of being " caught" are very very low and then you could show the eu tax paid docs and unless you had a determined official they would be happy.

However .... when you come to sell it the buyer is ( or should ) want to understand its tax status and if on temp import they will want proof it has been exported every 18months so tax is not due.

If it is later determined by the authorities that tax is due it would fall on the new buyer.

A friend had a boat and its tax status came to light when he bought a berth in Mallorca and they officials wanted a lot of paperwork. I don't want to go into the details - it was not the same as this - but things can and do sometimes come to light.

You could also bring it back to the U.K. to sell it etc.

However the proper answer is yes you need to take it out every 18 months.

The odds of being caught are very high imho. The boat is on an official 18 month import. Tax authorities have that on record/in their diary. They are quite likely to walk by in month 19 to check, especially if their files contain no re-export record in month 17/18.
OP needs to go to Algiers or wherever suits.

 

[jrudge]

J that isn’t correct. Tranona is correct.

The tax payable is primarily due by the first guy, who imported it at the start of the 18month period.

If that person fails to pay then in some countries the tax authorities have a statutory lien on the boat and then it becomes the buyer’s problem (but never the buye’rs obligation to pay), but only if the tax authorities choose to invoke their lien, which they may well not if the buyer is innocent.

Of course there can be quite a mess for a year or two, so none of this is nice for the buyer, but the primary tax obligor is always the “previous corner” in the scenario we’re discussing.

I suppose my point of view is that whilst it maybe the sellers obligation it is the buyers problem! Getting a U.K. national to pay tax to say France in an asset sold several years ago I suspect it challenging.

As an aside I did not know the liability attached to a person I assumed it was held by the asset.

This then seems to open up a nice loophole where Mr Nobody your friendly Albanian builder brings in a boat and sells is and the boat is clear. If that is the case then one would question why we care about the boats vat history as the obligation sits with the now departed seller. Lien and other agro aside.

 

[jrudge]

The odds of being caught are very high imho. The boat is on an official 18 month import. Tax authorities have that on record/in their diary. They are quite likely to walk by in month 19 to check, especially if their files contain no re-export record in month 17/18.
OP needs to go to Algiers or wherever suits.

The proof of export as far as I know is evidence based. Ie I have my Tunisia mooring receipt and then return to Mallorca. Mallorca don't care and don't log the arrival nor you leaving ( maybe they should but in practice no one cares ).

So I am not sure what record there is other than the proof of the boat leaving the eu. We were asked for this once in Bonacio. They went down the dock boarding every boat of size. Took a literal 30 second look at the paperwork and moved on. All they were interested in was a non eu passport and proof it had left the eu within 18 months. Both of which we ( fortunately !) had.

In the op case he would show his eu vat receipt from long ago and off they would go. To be clear it is not legal as above but would likely pass basic inspection in practice.

However as above what the op is seeking to do is not legal.

The person I know who got done in Palma was on the hook for double the tax not paid. The debate in that case was were they resident in the eu or Australia. I don't know the final outcome.

 

[jfm]

I suppose my point of view is that whilst it maybe the sellers obligation it is the buyers problem! Getting a U.K. national to pay tax to say France in an asset sold several years ago I suspect it challenging.

Sure, agreed, but it's not what you said

As an aside I did not know the liability attached to a person I assumed it was held by the asset.

The tax liability is person A's liability, secured (in some cases) on an asset now owned by person B. Person B has no personal liability, which will be important to a lot of people (eg those employed/working in the professions and regulated people) even if they choose to pay the tax to stop their new asset being seized.

This then seems to open up a nice loophole where Mr Nobody your friendly Albanian builder brings in a boat and sells is and the boat is clear. If that is the case then one would question why we care about the boats vat history as the obligation sits with the now departed seller. Lien and other agro aside.

I'm not following your logic and I don't see the loophole that you're seeing. I never said the boat was clear. You can't just say "lien aside" because that's the crux of the issue.

 

[jfm]

The proof of export as far as I know is evidence based. Ie I have my Tunisia mooring receipt and then return to Mallorca. Mallorca don't care and don't log the arrival nor you leaving ( maybe they should but in practice no one cares ).

So I am not sure what record there is other than the proof of the boat leaving the eu. We were asked for this once in Bonacio. They went down the dock boarding every boat of size. Took a literal 30 second look at the paperwork and moved on. All they were interested in was a non eu passport and proof it had left the eu within 18 months. Both of which we ( fortunately !) had.

In the op case he would show his eu vat receipt from long ago and off they would go. To be clear it is not legal as above but would likely pass basic inspection in practice.

There is much mixing up of things here.

In some countries (eg UK) TA relief is not an automatic entitlement - unless you have claimed it you don't have it.

In other countries (incl ES and FR afaik) you are entitled to TA without claiming it, though you have the choice to claim it, and for transportation by a shipping firm engaged in the trade of shipping you must claim it.

So in your case you could just sail to Tunisia in your own boat, return to Spain or France, and automatically be entitled to the TA relief if the boat owner resides outside the EU (entitlement has nothing to do with passport, even if on a dockside inspection they choose to look at passport).

In OP's case, he has explicitly said that he has got his TA by clearing the boat thru Spanish customs, so that's what record there is. I'm struggling to see how you're confident that he would be ok in practice, given that he has an on-the-record importation, and if say 19 months have gone by with no provable trip Algeria

 

[Hooligan]

Bought it 4 years ago, shipped it back and then last year brought it back to EU. Worth as Tranona says looking at exact timeline because it could fall within RGR. Not sure whether clearing customs on TA invalidates but seems to me worth trying the RGR route as seems timeline may be in and around 3 years and there may be easier ways to ensure it is within 3 years. I reckon chance of being caught is negligible but as ever in life expect the unexpected and doesn’t seem worth taking the risk to me

 

[DAW]

The proof of export as far as I know is evidence based. Ie I have my Tunisia mooring receipt and then return to Mallorca. Mallorca don't care and don't log the arrival nor you leaving ( maybe they should but in practice no one cares ).

So I am not sure what record there is other than the proof of the boat leaving the eu. We were asked for this once in Bonacio. They went down the dock boarding every boat of size. Took a literal 30 second look at the paperwork and moved on. All they were interested in was a non eu passport and proof it had left the eu within 18 months. Both of which we ( fortunately !) had.

In the op case he would show his eu vat receipt from long ago and off they would go. To be clear it is not legal as above but would likely pass basic inspection in practice.

However as above what the op is seeking to do is not legal.

The person I know who got done in Palma was on the hook for double the tax not paid. The debate in that case was were they resident in the eu or Australia. I don't know the final outcome.

The principles that apply to eligibility for TA are straightforward and intended to permit free movement within the EU without payment of VAT. However, the rules which apply to entry and exit from and transit within the EU interact with domestic legislation, can be considerably more complex and vary from country to country. It is important to consider not just the high-level guidance on free movement issued by the EU, but also the domestic legislation of the countries in which you arrive, pass through and depart from ... and these can be different for vessels which are EU VAT paid and those admitted under TA.

As jfm states, in some countries you are automatically entitled to TA, while in others you are not and specific documents have to be filed with the relevant tax authority. Free movement between EU countries under TA is only permitted if you comply with national legislation and exemption from payment of VAT does not always fully exempt you from import/export regulations to record your presence. Simply demonstrating that you went somewhere else is not the same as registering your departure if this is required. In some cases you have to register your departure from the EU with the original country of entry even if you depart from somewhere else, and if you don't then from their perspective the clock doesn't stop. In some of the countries in the eastern Med you can't register your arrival unless you can prove evidence that you have registered departure from the previous country. If you are genuinely cruising through the EU and not simply based in one location, selection of points of entry and points of departure can be important.

I have friends who own larger vessels kept in the EU under TA and their yacht management companies are meticulous about filing documents to record entry and exit from and movements between certain EU countries, so for them this is obviously viewed as a significant area of risk. While most port officials don't seem to care and the likelihood of enforcement action against a private owner of a small or mid-size vessel behaving reasonably and kept in a single location seems very low, the possibility is always there. As with other issues, once you are in the cross-hairs of a national tax authority ignorance of the regulations is not usually a very good defence.