This VAT thing

[c_j]

Anyone care to explain the Vat rules on new and S/H boats to me. Looked at a Targa 52 of which I think I am correct in saying £74k of it is VAT!

What are the options for charter etc and claiming back?

I see there are some companies that manage this for you but the charges are (there's a suprise) very high.

CJ
chris@stone.uk.com

www.stone.uk.com

 

[EME]

As well as I can.

Basically all boats within the EC are liable to VAT in the country where thetransaction takes place. These rules have been around since 1992/4 so they are rather difficultto circumvent.
The only way that you get 'around' this that I now about are :-
a) When used for charter/rental purposes ( and this will as far as I can make out only apply for boats held as part of limited companies...otherwise C&E do not appear to accept the criteria...at least that is what I was told by C&E!!)
b) If the boat is bought as an asset by a trading company ..AND it demonstartes substantive use in teh entertaining of staff and customers or
c) Under the French leasing scheme ( which allows you to reduce the VAT payable by up to 1/2 and now can be done with English-flagged boats). This sounds wonderful until you work out the true cost of financing and find that you would have been as well off paying ALL the VAT and finacing through Barclays Marine.

I am looking for a way to do it myself as I've found a boat which is not VAT-paid but can't find a way of continuing like that !! Ineed finace as well...so if you find a way of getting finance and avoiding VAT we're going places !!

I am WHAT I say I am

 

[Deleted User YDKXO]

You cannot reclaim VAT on a secondhand boat unless the boat has already had VAT reclaimed on it and is offered ex VAT in which case you will have to pay VAT to the vendor and reclaim it in the course of your business. If you are outside the EC eg Channel Islands, you can buy a boat ex VAT and use it outside the EC but the first time you enter an EC port, VAT is liable in full unless, of course, you are a Channel Islands resident
If you plan to start a charter business and it has to be a proper business you can buy a new or secondhand ex VAT boat (not a secondhand boat which is already VAT paid) and reclaim the VAT on the boat and any other goods/services purchased for the charter operation. I have looked into this situation myself with a firm of bean counters and they tell me that the Revenue is very wise to this kind of thing and they will be checking that the charter operation is a genuine business with genuine expectation of profit and ROCE. In addition, if you intend to use the boat for personal use, there will be a benefit in kind liability which is far better negotiated with the Revenue when you set the operation up then when they find out about it. I think its viable to buy a boat and locate it in certain parts of the Med or the Solent with the intention of using it partially yourself and partially for charter and still get enough of a return to call it a business. Personally, I would bite the bullet and buy a secondhand VAT paid boat for 4 reasons. Firstly, it wont depreciate as much as a new boat, secondly, if you dont get as much charter income as you expected, you're not going to get pressure from C & E to pay the VAT, thirdly, in some parts of the Med (eg France) the local C & E are very hot on checking VAT documents and you dont want the hassle of explaining why your boat is not VAT paid every time you use it yourself and, fourthly, you wont be so pissed off if your boat is somewhat trashed by charterers
BTW I dont agree with Learner that a company can buy a boat just for entertaining customers and suppliers. This used to happen years ago but the Revenue clamped down on it; in any case, entertaining is not an allowable expense against tax these days
PM me if you want to discuss this further

 

[Deleted User YDKXO]

Chris, I forgot one thing. Charter agents will charge between 15 and 25% depending on the service they give which will include marketing, getting a skipper, cleaning the boat before and after etc. On the Cote d'Azur for example, the better agents market charter boats to clients in posh hotels and villas who are looking for a day out and they know who to contact and, more importantly, which palms to grease. I spoke to one company that showed me a boat that they had got an average of 60-70 days charter a year for 4 years. Firstly, that kind of charter is certainly very profitable for the owner but, just as importantly, the boat had been sufficiently well managed not to look too tired. I reckon a good charter agent could be the difference between making the thing work or not

 

[EME]

In relation to VAT , you will note that I said for 'entertaining staff' not suppliers. As long as the surnames of the 'staff' are different you should be OK as I understand it . This isn't theory, I know a 'company' that does that , at least so the CEO/Main shareholder claims..(over a year since I' last saw him though) ...and no I won't name him or the company, never know who is watching.
I THINK staff entertaining is still a loophole ... unless someone knows better of course.

If VAT-free is so bad , why is it that at a guess 20% of all boats >35 feet in Med are VAT free sales in first 3-5 years?
French aren't that bad, they get more upset when you can't speak their language.
Have a look at Sunseeker 'pre-owned' adverts. VATfree prevalent there.

<font color=red> Inoffensive signature following :
<font color=black>I am WHAT I say I am<P ID="edit"><FONT SIZE=-1>Edited by Learner on 04/11/2002 17:57 (server time).</FONT></P>

 

[Deleted User YDKXO]

If its really the case that a company can buy a boat, claim back VAT and set it all off against tax, simply for entertaining staff then I'm straight down to Poole to get a Predator 63 to entertain my secretary at Gordon Brown's expense! If the Revenue only allow a company to set off against tax £75 per person for staff entertainment at Xmas, are they likely to turn a blind eye to a boat? Dont think so but I'd very much like to know how your CEO mate does it
Re VAT free status, there are a number of reasons
1. Operated wholly or partially as a charter business (certainly true of many Sunseekers even in UK)
2. Owned by non EC resident
3. Owned by offshore company
4. Purchased through a leasing scheme of the type used in France, I believe, whereby the leasing company pays the total amount including VAT, you pay it all back over 10yrs but if the boat is sold before the end of the lease, VAT is payable

1. is viable, 2. is pot luck, 3. and 4. are very expensive

 

[EME]

1)As he claims uses it for every excuse in book...number of staff taken out any jaunt is greater than number of others ... so he claims. used as 'Perks' / 'Prizes' as I say as he claims. I know no more .. about a 600 person company.

2) French-leasing scheme is I believe unique to France. However you can now do it with a UK flag. If anyone wants a name... please pm - nothing to do with any professional interest of mine( Oh also availableover 3-10yrs with deposits upwards of 30%). Boat is considered 'VAT-paid' at end of term BUT see my note about other UK forms of finance before jumping.



<font color=red> Inoffensive signature following :
<font color=black>I am WHAT I say I am

 

[jfm]

Some mix ups here

There is some mixed up stuff above in this thread:

1. Talk of the Revenue "clamping down" etc isn't quite right. What matters is the law. Only Parliament can impose taxes. Sorry if that sounds philosophical, but it's true. If a tax inspector tries wrongly to collect a tax, you tell him where to get off.

2. The £75 is not a limit to what can be set off against tax. It's the limit above which a Christmas Party etc becomes a taxable BIK for the employees. The full cost of the entertainment is still deductible for the company

3. So, if the boat is used for staff entertaining or such like, the risk you have to manage is taxable BIK. Clearly the employer needs to pick up the tab for this tax if it bites, as employees will not be massively motivated if they get a tax bill following the awayday. But this can be managed fairly easily, using the same analysis as to why if you take your employees to an offsite meeting in say Cliveden they do not all get taxed as a BIK, even if way over £75. You simply have a staff meeting on the boat. The boat is not made available to employees for their "personal use"

4/5 If the boat is owned by non EU resident/offshore company that in no way avoids VAT if the boat is physically in the EU. That's nonsense.

6. The high interest cost of the French leasing scheme is mitigated by not borrowing so much money - ie pay 70% of the cost up front and only lease 30%. This scheme gives an absolute VAT saving, it is not a loophole it is quite clearly intended in the law

7. Imho the best solutions in UK are either (a) buy and moor in Jersey for year one then import to UK and hope you can agree a low import value with UK customs. Or (b) run a charter business but beware doing that in a limited company else you will get a large BIK tax when you (as director) have the boat available for "personal use". For this reason, if you can be bothered, it's better to run the charter business as a limited partnership imho.

All the above is sort of straight, based on the law. I fully accept that some people will get a cheaper deal by "not declaring" etc etc, but that's a different story.

 

[Deleted User YDKXO]

Re: Some mix ups here

jfm, I stand corrected to your greater knowledge on this subject but I cant agree on pt 4/5. How come a Jersey resident (ie a non-EU resident) can visit, say, France (ie the EU) with his boat and not have to pay VAT? I also happen to know a Swiss resident who owns a boat in Majorca and has never paid VAT in the EU on his boat.
BTW have you received a PM from me?

 

[EME]

Re: Some mix ups here

JFM

Thanks. So Erudite. A1 correct. Real People make things happen.

This place worse than Dog and Duck/forums/images/icons/wink.gif

NM

<font color=red> Inoffensive signature following :
<font color=black>I am WHAT I say I am

 

[jfm]

VAT not dependednt on residence

The Jersey resident can visit France with his VAT-free boat and will not pay French VAT, provided he is only keeping the boat in France temporarily. If he leaves the boat in France permanently (I think the trigger point is 6 mths, not sure...) then he has to pay French VAT. The VAT is not at all connected with the fact he is a resident of Jersey, it's all to do with whether the boat is in or out of the EU (temporary visits either way being ignored)

As regards the Swiss guy with Majorca boat, there aren't enuf facts to comment but most definitely if a Swiss guy with a VAT-unpaid boat moors it in Spain then Spanish VAT is due. But there could be some other factor, eg the boat is ancient, or is a charter buisness asset, or he's not declaring it, etc etc

Yes, sorry, got PM, will reply

 

[tcm]

Re: 60 days charter per year??

okay BUT... the 60 days is "July and August".

An agent rang me and said they had someone interested in taking the boat on charter for eight weeks but I had to tellem to sod off and buy a boat themselves. Spose this flushes out real charter business (which should get the vat back) and casual charterers (like me) who shouldn't.

 

[Deleted User YDKXO]

Re: 60 days charter per year??

I think this boat was an exception although Campers at Golfe Juan told me that they got even more for some of their boats, albeit mega yacht type. The boat in question was an Alfamarine 50 at La Napoule managed by Azur Yachting and is a pure charter boat ie no personal owner use. They told me their charter season was May to Sept but definitely, as you say, most work comes in during July/Aug and the vast majority of the work is skippered day charter

 

[Deleted User YDKXO]

Re: VAT not dependednt on residence

Still not sure you're right as I, as a UK resident, cannot buy a VAT free boat in the CI and leave it in France for 6 months. VAT is due as soon as the boat enters the EC whereas for a CI resident, VAT is not due, at least not immediately (you're probably right, there is a time limit) so residency is an issue not just boat location IMHO
The Swiss guy owns a 4yr old Sunseeker which was imported into Switzerland initially where local tax was paid and then moved to Majorca where Spanish VAT has not been paid. The boat is now for sale ex VAT. Incedentally, I have been told that Spanish VAT on boats can be as low as 10% because of 'flexibility' (whatever that means) on the valuation of the boat