US registered yacht - back to UK from France!!

[Andy and Lyn]

A question for those of you who are knowledgeable of VAT /import taxes etc.!!

I am contemplating buying a delapidated old Westerly which is still in France for a good price. She is basically sound but needs much in the way of cosmetic work, mainly internally.

The plan is to spend a few weeks getting her sea/canal worthy then bring her back to UK via the canals/Le Havre and across the channel.

The current owner is going to put her on the SSR (UK), then sell.

As the price is likely to be circa euros 15K are there any taxes likely to be liable, VAT for instance! If the answer is yes then is it charged at 20% of the price I pay ; if not on what valuation! Any other taxes - bearing in mind that she was built in UK in 1984.

Looking forwards to any words of wisdom!

 

[Carter866]

I can't answer your question with any official authority but I can give you a bit of information regarding my similar situation.

In 2008, I purchased an 1972 Halcyon 27 in the UK. Being that I am american and living in France, I had to register it in the US and then get a French "Foreign Vessel Passport". Although the boat was built before December 31, 1984 and was most likely in the European Union on December 31, 1992 and therefore should be deemed VAT-paid, I have no way of proving all of this, therefore, I was a bit concerned that I would have to pay the VAT since and I am keeping it the EU longer than 180 days.

As it happened, no one ever asked for any documentation of VAT-status and I never asked to pay it. I have had the boat in France since March 2009, changed my "Foreign Vessel Passport" once at the French customs, and been boarded by French customs twice in Cherbourg and VAT has never been mentioned. I have also been to the UK several times and no one ever asked about it although I have never really been in contact with HM Customs since I am always arriving from an EU country.

I did meet a charter captain in Boulogne sur Mer who spent a winter there since the French customs confiscated the boat he was working on for not paying the VAT on previously American, but currently Dutch, registered vessel that had just enterred the EU; however, there is a bit of difference on the VAT of a 70' luxury yacht and my little Halcyon 27.

Obviously, there are some differences in our situations but I wouldn't worry too much about it; although, I do believe that it is the customs officials who get to make the valuation for VAT purposes.

Good luck with your new purchase!

 

[Tranona]

Absolutely no different from buying it in UK except that if it is on the French register it will need removing (vendor's problem) before you put it on the SSR. No need for him to register it as he will have to cancel immediately you buy it - all he will have done is made a £25 donation to HMG.

Registration is unconnected with any VAT issues - of which there are none anyway. The boat will qualify as "deemed VAT exempt" on the basis of age, assuming it was in the EU in 1992. Even if it were newer there would still be no VAT as sales between Private citizens are not "chargeable events". You can check out the "official" stuff on either the RYA site which has a whole section on the subject, or HMRC VAT notice No8 - but you won't see anything different from the above.

Follow the RYA guidance on buying a used boat, use the recommended form of Bill of Sale and ensure there is evidence the transaction took place in the EU. Then register it on line on the SSR, using a UK address, and carry on sailing it wherever you want.

 

[AndrewB]

Tranona is right.

In practice, with an obviously old boat that is now UK registered, you will never be challenged. However, a subsequent buyer might have the same misgivings as yourself, so you could consider that lack of proven VAT status should affect the purchase price slightly. I took that view when buying my present yacht in similar circumstances, though I was subsequently able to get confirmation from UK Customs of its "deemed VAT paid" status.

 

[Tranona]

HMRC discontinued this practrice several years ago. In reality, nobody is interested in an old boat, and even if there is a query then evidence that it was bought in the EU and has not spent recorded time outside is sufficient. There may be issues with old boats that have not been kept in the EU as they could be subject to VAT on import. None of this applies to the OP thogh.

 

[Andy and Lyn]

thanks to all.

So, digesting all the above it would appear that she would be VAT exempt on the basis of age!

Also, just to note, she is on the US register currently (never been on the French as far as i am aware) - so will work on the vendor to get that removed and onto SSR in his name - I will then initiate the transaction after that and change the SSR entry to reflect my ownership.

Does that all sound reasonable and legal?

 

[Tranona]

thanks to all.

So, digesting all the above it would appear that she would be VAT exempt on the basis of age!

Also, just to note, she is on the US register currently (never been on the French as far as i am aware) - so will work on the vendor to get that removed and onto SSR in his name - I will then initiate the transaction after that and change the SSR entry to reflect my ownership.

Does that all sound reasonable and legal?

Completely unnecessary for him to re-register. SSR is is not a record of ownership, simply a record that it is a qualifying British ship. To do that you register on line and no documents are required apart from your self declaration. I am assuming that you are formally a UK resident. All the deatils of how to do it are on the MCA site.

The really important thing is to get a Bill of Sale transferring title to you free of any charges. You can use the model RYA one. That is your evidence that you bought the boat in the EU from a private citizen.

However, a word of warning - the US registration rings alarm bells. If the boat was imported from the US then it is possible that VAT might have been due when it was imported. You really need to find out its history, as if it was "smuggled" ie not VAT paid then the liability is with the person who imported it, not you - but the liability also attaches to the boat so there is a possibility that customs could have a charge against the boat.

Note - it is not the state of registration that triggers any tax liability, it is the nature of the transaction - and a boat imported into the EU usually triggers off a VAT liability. There are exceptions, but they are limited and complex.

PS, sorry should have mentioned this earlier - had not appreciated the boat might belong to a US resident rather than an EU resident, so you really do need to get its full history so that you can identify any risks you are taking.

 

[AndrewB]

However, a word of warning - the US registration rings alarm bells. If the boat was imported from the US then it is possible that VAT might have been due when it was imported. You really need to find out its history, as if it was "smuggled" ie not VAT paid then the liability is with the person who imported it, not you - but the liability also attaches to the boat so there is a possibility that customs could have a charge against the boat.

But unlikely. The boat was British built before the cut-off date of 1st Jan 1985, so even if it was originally sold as a VAT-free export it would be exempt ... provided it was moored in the EU on the qualifying date of 31st Dec 1992. But as I discovered, UK Customs weren't really bothered that my yacht was not in the EU in 1992, they were satisfied by the evidence that it was originally built in Britain before 1985.

It would be useful to obtain proof that the yacht was British made and first sold before 1985: the best evidence would be original Bill of Sale from Westerly. Personally I would prefer to get the present owner to apply for SSR registration just in case any questions are raised at that stage. Once it has UK registration, it is extremely unlikely that VAT status will ever be called into question.

 

[Tranona]

But unlikely. The boat was British built before the cut-off date of 1st Jan 1985, so even if it was originally sold as a VAT-free export it would be exempt ... provided it was moored in the EU on the qualifying date of 31st Dec 1992. But as I discovered, UK Customs weren't really bothered that my yacht was not in the EU in 1992, they were satisfied by the evidence that it was originally built in Britain before 1985.

It would be useful to obtain proof that the yacht was British made and first sold before 1985: the best evidence would be original Bill of Sale from Westerly. Personally I would prefer to get the present owner to apply for SSR registration just in case any questions are raised at that stage. Once it has UK registration, it is extremely unlikely that VAT status will ever be called into question.

That is not correct. It is irrelevant where and when the yacht was made. The only thing that matters is when it was imported into the EU. Even if the same person took the boat out for more than 3 years it would still be liable when it returns, although there is probably some discretion under the returned goods rules as to the time.

That is one of the reasons why HMRC has stopped issuing certificates. The only document that proves VAT has been paid is the original invoice, and if the boat was originally owned by a non EU resident and imported privately into the EU there should be either a receipt from customs at the time of import, or a certificate showing exemption under the returning resident rules.

You are right in that there is little chance of anybody checking an old boat but the risk is still there. HMRC VAT Notice No 8 or a user friendly explanation on the RYA website covers this.

 

[Chris_Robb]

That is not correct. It is irrelevant where and when the yacht was made. The only thing that matters is when it was imported into the EU. Even if the same person took the boat out for more than 3 years it would still be liable when it returns, although there is probably some discretion under the returned goods rules as to the time.

That is one of the reasons why HMRC has stopped issuing certificates. The only document that proves VAT has been paid is the original invoice, and if the boat was originally owned by a non EU resident and imported privately into the EU there should be either a receipt from customs at the time of import, or a certificate showing exemption under the returning resident rules.

You are right in that there is little chance of anybody checking an old boat but the risk is still there. HMRC VAT Notice No 8 or a user friendly explanation on the RYA website covers this.

I sometimes wonder if the PIGS (One I) will take advantage of the proof of VAT payment, and impound any boat that cannot show evidence of VAT payment, hoping to make a quick buck. There are an awful lot of boats that don't have their original VAT invoice around. You can imagine the Port Police in Greece and Portugal getting their knickers in a right twist over this at some poor unsuspecting owners cost.

Lets hope it doesn't happen.

 

[Tranona]

I sometimes wonder if the PIGS (One I) will take advantage of the proof of VAT payment, and impound any boat that cannot show evidence of VAT payment, hoping to make a quick buck. There are an awful lot of boats that don't have their original VAT invoice around. You can imagine the Port Police in Greece and Portugal getting their knickers in a right twist over this at some poor unsuspecting owners cost.

Lets hope it doesn't happen.

No evidence of any interest except if there is something in the history of the boat that suggests it might have been imported. If everything about the boat shows it was bought in the EU and has been kept there, nothing customs can do about it. So, once they see your UK Bill of Sale and registration they will leave you alone.

 

[AndrewB]

That is not correct. It is irrelevant where and when the yacht was made.

That was not the view HMRC took in my case. Because the yacht was built and first sold in Britain before the cut-off date, with no evidence to the contrary they were prepared to accept that VAT probably was paid, so it was granted "considered to be VAT paid" status.

However, in making this ruling, it mattered that the yacht had never been sold outside the EU even though it had been kept out of the EU for most of its life. The yacht was therefore entitled to "Returned Goods Relief".

This goes beyond my understanding of the rules, but HMRC does have considerable discretion.

 

[Tranona]

This goes beyond my understanding of the rules, but HMRC does have considerable discretion.

One of the difficulties with VAT is that both the principle and the practice were not designed to be a tax on yachts, but on transactions - as its name implies a tax on the value that is added at every transaction. This is "easy" if you are in a closed economy, but does not work for goods that are imported where there is no value added just through the act of importation. To ensure that consumption is taxed in the same way and imported goods do not undercut local goods, a tax equivalent to VAT is applied - but it is simply an ad valorum tax just like duties. Inevitably, as with duties there also needs to be some exemptions to cope with specific activities that should not be taxed - like dealing with personal chattels of returning residents, or temporary importation for a variety of activities.

So when you move outside the straightforward transactions, you need to look very closely at all the facts relating to the transaction to determine if there is a potential tax liability, and perhaps how it might be avoided or minimised.

From the seemingly simple scenario posed by Andy and Lyn there are a number of possible variations which would have different outcomes. You need to see every single transaction at change of ownership to determine if a tax liability has arisen which is still outstanding. The simplest (negative) situation is if the boat was exported to the USA, bought by a US resident then sailed back to Europe. To cruise in the EU the owner could get temporary importation, initially for 18 months, but easily renewable by leaving and re-entering. However the owner would be liable for VAT (and RCD compliance, if appropriate) if he tried to sell it in the EU. On the other hand if he had bought it in the EU, and just registered it in the US, and kept it in the EU, then there would be no VAT liability. The only way of finding out is to get the complete history of transfers of ownership.

 

[Andy and Lyn]

thank you gentlemen for the words of wisdom - i now feel much more comfortable with the VAT rules - indeed the post previous to this one summed it up very well for me.

My next task will be to trawl thorugh the paperwork to try to determine the particular yachts audit trail and susequently make an assesment where there "may" be a transcation/importation that could invite scrutiny from the authorities.

 

[Andy and Lyn]

just to update where this all concluded -

it appeared that the paperwork trail opened up a number of questions where answers were not always straightforward/forthcoming.
The previous owner also had some unusual practices in boat maintenance and therefore we decided not to proceed.

Thank you to all for providing very useful information as this thread developed and no doubt saved me much money and grief should i have continued!!
Andy

 

[peterborthwick]

VAT on 'main residence'

don't know where to put this, but here seems suitable?

I'm considering buying a US registered yacht as a full time liveaboard cruising HOME. Even if i did (which is not my current intention) sail it back to the UK and live on it, and sail it, here longterm, would it not be deemed VAT free, because it is my only home / residence?? (currently you do not pay vat on a bricks and mortar house).

 

[Ariadne]

That is not correct. It is irrelevant where and when the yacht was made. The only thing that matters is when it was imported into the EU. Even if the same person took the boat out for more than 3 years it would still be liable when it returns, although there is probably some discretion under the returned goods rules as to the time.

Let me get this straight, my 1981 VAT free (I do have the papers to prove it) boat (and my home) will be liable for VAT should I ever decide to bring it back to Europe!

Can you explain how something I know is currently VAT exempt will suddenly be VAT liable when it comes back to Europe. Even though it not changed ownership. HMRC & all the various EU equivalents must be rubbing their hands with the though of all that extra cash to generated from the double taxation (which doesn't/shouldn't exist in Europe) of cruising boats and commercial shipping.

In any case the view of HMRC (again I have a letter from them to this effect) is that if you are UK registered HMRC is responsible for collecting any VAT due, no other country has the right to tax a UK vessel.

 

[jimbaerselman]

Let me get this straight, my 1981 VAT free (I do have the papers to prove it) boat (and my home) will be liable for VAT should I ever decide to bring it back to Europe!

Assuming you've been residing outside the EU for over a year, and you're returning to live in UK, you can import your personal goods (which include boats) free of duty and VAT. See HMRC Notice 8 para 3.15 for the exact details and conditions which apply.

The UK rules (and their application) for all this stuff are very reasonable. They are also published and easily accessed, which is more than you can say of customs regulations in some EU countries.

It makes no difference if a yacht is your home or not. In the EU it's just a "means of transport".

 

[peterborthwick]

Let me get this straight, my 1981 VAT free (I do have the papers to prove it) boat (and my home) will be liable for VAT should I ever decide to bring it back to Europe!

Can you explain how something I know is currently VAT exempt will suddenly be VAT liable when it comes back to Europe. Even though it not changed ownership. HMRC & all the various EU equivalents must be rubbing their hands with the though of all that extra cash to generated from the double taxation (which doesn't/shouldn't exist in Europe) of cruising boats and commercial shipping.

In any case the view of HMRC (again I have a letter from them to this effect) is that if you are UK registered HMRC is responsible for collecting any VAT due, no other country has the right to tax a UK vessel.

i've just discovered via the RYA site that if you return to the UK, having been resident away (living on the boat in the Caribean for example)for 12 months or more, you can bring the boat back into the country as a 'personal possession' VAT free in the same way as you could a car.

Not sure if this would work for other EU member states that we as UK citizens are entitled to live in without a visa??

 

[Tranona]

i've just discovered via the RYA site that if you return to the UK, having been resident away (living on the boat in the Caribean for example)for 12 months or more, you can bring the boat back into the country as a 'personal possession' VAT free in the same way as you could a car.

Not sure if this would work for other EU member states that we as UK citizens are entitled to live in without a visa??

That is indeed correct - as I suggested in answer to your other questions there are exemptions, one which you have found.

That one is designed to deal with people who are taking up residence in the EU (or returning having been deemed resident elsewhere) and applies to all kinds of assets, not just boats. However, it is not always easy to become non resident from UK without becoming resident somewhere else, and most people who live on their boats and travel around keep their residency in the UK for pragmatic social and financial reasons. If they can meet the requirements of becoming non-resident, then that exemption is potentially available should they return and the asset/boat ownership meets the requirements. As you will also have seen there are then (not too onerous) restrictions on selling the asset.

There is a difference between the right to live in another EU country and the requirement for being resident. Just as a simple example, while you can keep a foreign (but EU) owned boat in Spain indefinitely and you can visit as often as you like, if you stay for more than 183 days in a year you can become resident in Spain and subject to their tax regime.

Think you have to accept that it is not easy to bring a boat from the US to the EU, which explains why you find so few US boats here, despite the significant difference in prices. The two barriers are regulatory and financial - any difference in price is soon eaten up by the costs (shipping, if you are doing it that way), duty, VAT and meeting the requirements of the RCD.

This does not mean it is impossible, and there are individual situations where it is worthwhile. For example many EEA built boats were exported to the US 20 or 30 years ago and can be re-imported without complying with the RCD, but still liable to VAT. In many cases these boats have a low value in the US so the difference may make it worthwhile. There are also more modern or refitted boats that can comply easily with the RCD, but inevitably these tend not to be "cheap", but can be worthwhile because the type of boat may not be available in the EU.