Vat Advice on buying a boat

[mainshiptom]

Ok Found a boat and had a good look and made an offer for the boat, The broker did say that the boat vat status is not clear.

The boat is 1990

The offer has been accepted and the broker is asking for 20% on top..

This is where I am not sure what to do?

The previous owners apparently operated a charter business.

Advice please...

 

[jimmy_the_builder]

If the vat status is 'not clear', on what basis is the broker asking for the extra 20%?

If in fact the seller is a vat-registered business then presumably they will be charging you vat on sale of the vessel, and providing a vat invoice. Whose name is on the current bill of sale?

 

[petem]

This might be of interest - http://www.keystonelaw.co.uk/keynotes/the-vat-problem-top-tips-for-yacht-buyers-and-owners.

Where was the boat on the 31 December 1992, any idea?

 

[petem]

If the vat status is 'not clear', on what basis is the broker asking for the extra 20%?

I wondered that. As far as I know, you can't just send HMRC a cheque, you need to have a VATtable transaction to occur to pay VAT.

 

[Tranona]

This might be of interest - http://www.keystonelaw.co.uk/keynotes/the-vat-problem-top-tips-for-yacht-buyers-and-owners.

Where was the boat on the 31 December 1992, any idea?

That information in your link is wrong - or at least misleading. While the 1992 date is important in the transition arrangements, but it is only relevant for pre 1986 boats (that is 8 or more years before the 1992 date). Boats sold before that are "deemed VAT paid" IF they were in the EU on the qualifying date. Clearly that does not apply to a 1990 boat.

if the boat has a history of private ownership from new then it is a reasonable assumption that VAT has been paid even if there is no invoice to "prove" it. There is no way the broker can demand any additional payment over and above the sale price. It is up to the buyer whether he is prepared to own a boat without VAT evidence. For most it is not a problem as there are literally thousands of boats in the same situation, happily being used freely by their owners without problems.

 

[jfm]

Ok Found a boat and had a good look and made an offer for the boat, The broker did say that the boat vat status is not clear.

The boat is 1990

The offer has been accepted and the broker is asking for 20% on top..

This is where I am not sure what to do?

The previous owners apparently operated a charter business.

Advice please...

We're a million miles from having enough info to answer this. Like where is the boat, and is the 20% that broker is asking for VAT or just extra money that he is asking for? And I hope he is asking on behalf of seller (ie seller is asking for 20%) but you don't say. Do you want us just to guess the answer? If you give ALL the information then you could get a decent unguessed answer.

 

[volvopaul]

Ok Found a boat and had a good look and made an offer for the boat, The broker did say that the boat vat status is not clear.

The boat is 1990

The offer has been accepted and the broker is asking for 20% on top..

This is where I am not sure what to do?

The previous owners apparently operated a charter business.

Advice please...

Hmm a very interesting question, wherever it is I would not be paying either the broker or the seller any amount of money for unquestionable vat , if it is not vat paid and you do buy it go through the proper channels and pay the vat on the purchase price to our HMRC ,
If it's abroad check the countries vat amount as it could be less than 20% .

Now maybe here is a question for JFM etc.

I carried out a sea trial and Inspection on a boat this week, I can't go into too much detail but myself and the surveyor discovered that's at one time the boat was ex vat until it was imported back into the U.K., prior to this it was valued and IVA paid , it was then brought into the UK and deemed vat paid where it was then sold on to a UK resident .
Now here comes the crunch.

At the time the IVA was paid the boat was valued at where I'd say half of what it was actually worth in 2010, its was sold on again through a U.K. Main dealer for more than twice the sum that IVA had been paid on it, now me being me I'd smell a rat here and class that transaction as vat fraud , can you help as buyer is very unsure if he is buying something that could in effect be not fully vat paid and the fact he could have problems when he comes to sell it.

Sorry if I've hijacked your thread but it may help you one way or another Tom.

 

[jrudge]

Hmm a very interesting question, wherever it is I would not be paying either the broker or the seller any amount of money for unquestionable vat , if it is not vat paid and you do buy it go through the proper channels and pay the vat on the purchase price to our HMRC ,
If it's abroad check the countries vat amount as it could be less than 20% .

Now maybe here is a question for JFM etc.

I carried out a sea trial and Inspection on a boat this week, I can't go into too much detail but myself and the surveyor discovered that's at one time the boat was ex vat until it was imported back into the U.K., prior to this it was valued and IVA paid , it was then brought into the UK and deemed vat paid where it was then sold on to a UK resident .
Now here comes the crunch.

At the time the IVA was paid the boat was valued at where I'd say half of what it was actually worth in 2010, its was sold on again through a U.K. Main dealer for more than twice the sum that IVA had been paid on it, now me being me I'd smell a rat here and class that transaction as vat fraud , can you help as buyer is very unsure if he is buying something that could in effect be not fully vat paid and the fact he could have problems when he comes to sell it.

Sorry if I've hijacked your thread but it may help you one way or another Tom.

If many years have passed and no enquiry has been made then I would imagine it was fine.

If the value was in question then the authorities would have questioned it. It is not for a future buyer to determine the value of an asset many years ago. As to how much it was then sold for an asset is worth what someone will pay for it at the time. The value could have been inflated to allow a generous part exchange you just don't know.

The boat could have been refurbished , had major mechanical issues and so on none of which you or an official looking at it now are party to.

 

[jfm]

if it is not vat paid and you do buy it go through the proper channels and pay the vat on the purchase price to our HMRC

You can't. HMRC will (quite rightly) not accept money from Tom unless it is clear they are entitled to it, and they are not. In this context, if you want to get HMRC agreement to accept your money, you would need to create a paying agent agreement with seller (which would be way beyond a typical yacht broker to get right and don't expect any mickey mouse precedent on RYA website) OR show to HMRC that the boat has been smuggled, which aint worth the hassle and might not be true.

... the surveyor discovered that's at one time the boat was ex vat until it was imported back into the U.K., prior to this it was valued and IVA paid , it was then brought into the UK and deemed vat paid where it was then sold on to a UK resident .
Now here comes the crunch.

At the time the IVA was paid the boat was valued at where I'd say half of what it was actually worth in 2010, its was sold on again through a U.K. Main dealer for more than twice the sum that IVA had been paid on it, now me being me I'd smell a rat here and class that transaction as vat fraud , can you help as buyer is very unsure if he is buying something that could in effect be not fully vat paid and the fact he could have problems when he comes to sell it.

Hola! Jeeze - hard to follow. When you use the Spanish expression for VAT, namely "IVA", do you mean UK VAT???? Or are we in fact talking about a Spanish VAT scenario here?

Assuming we are talking about UK VAT, then IF there has been a fraud the boat is smuggled. With a smuggled boat the potential new buyer is as a matter of UK law exposed to pay the unpaid VAT (in the sense that the boat is statutorily mortgaged to HMRC in the event the fraudster importer doesn't himself pay it when/if assessed).

BUT this is incredibly unlikely to happen. There is no case on record where HMRC have pursued an innocent later owner of a previously smuggled boat, and as a matter of law they must assess and pursue the smuggler first. It is very very highly likely that new owner will have no problem with HMRC.

On the other hand, if we are talking about Spanish VAT then under Spanish law VAT-value is determined lawfully on look-up tables that give lower values than market value, so you get the effect you describe and there is no fraud. The boat is then not deemed VAT paid when it is imported to uk; it is actually VAT paid in free circulation in the EU.

Of course, when new owner himself decides to sell, and prospective buyer googles and looks on this forum, there will be revealed various incorrect theories about VAT liabilities and the buyer will be spooked. Ni modo, así es la vida. Adios amigo!

 

[MapisM]

LOL, I believe that any prospective buyer who looks CAREFULLY on this forum would reach one and only conclusion, i.e. that it's better to buy a used boat with a "non-paid" (or unclear) VAT status, because that's a good argument for asking a price reduction...

 

[npf1]

LOL, I believe that any prospective buyer who looks CAREFULLY on this forum would reach one and only conclusion, i.e. that it's better to buy a used boat with a "non-paid" (or unclear) VAT status, because that's a good argument for asking a price reduction...

To add ... at least with buying an appropriately priced 'non VAT paid' boat and then paying the VAT, means you have certainty.

 

[volvopaul]

You can't. HMRC will (quite rightly) not accept money from Tom unless it is clear they are entitled to it, and they are not. In this context, if you want to get HMRC agreement to accept your money, you would need to create a paying agent agreement with seller (which would be way beyond a typical yacht broker to get right and don't expect any mickey mouse precedent on RYA website) OR show to HMRC that the boat has been smuggled, which aint worth the hassle and might not be true.

Hola! Jeeze - hard to follow. When you use the Spanish expression for VAT, namely "IVA", do you mean UK VAT???? Or are we in fact talking about a Spanish VAT scenario here?

Assuming we are talking about UK VAT, then IF there has been a fraud the boat is smuggled. With a smuggled boat the potential new buyer is as a matter of UK law exposed to pay the unpaid VAT (in the sense that the boat is statutorily mortgaged to HMRC in the event the fraudster importer doesn't himself pay it when/if assessed).

BUT this is incredibly unlikely to happen. There is no case on record where HMRC have pursued an innocent later owner of a previously smuggled boat, and as a matter of law they must assess and pursue the smuggler first. It is very very highly likely that new owner will have no problem with HMRC.

On the other hand, if we are talking about Spanish VAT then under Spanish law VAT-value is determined lawfully on look-up tables that give lower values than market value, so you get the effect you describe and there is no fraud. The boat is then not deemed VAT paid when it is imported to uk; it is actually VAT paid in free circulation in the EU.

Of course, when new owner himself decides to sell, and prospective buyer googles and looks on this forum, there will be revealed various incorrect theories about VAT liabilities and the buyer will be spooked. Ni modo, así es la vida. Adios amigo!

As far as I'm aware John the boat was being traded in against another took in PX by a well known U.K. Dealer, not boats before you ask, before it left Spain its IVA ( a cert is available) was paid in Spain however in my view the boat was undervalued as I know the true value of this certain make and model of boat, tax was paid there no doubt because someone took advantage of a system that allows a lower calculation value therefore a lower amount is payable , I'm sure our hmrc wouldn't allow this to happen .
So if you would like to add and help me the question is, if my client buys this boat here in the U.K. He will not get a U.K. Vat paid invoice from history of the boat but we'll get an IVA cert showing the tax was paid in Spain around 2010 before it was shipped back to the U.K. In the deal around 2010.
If your still not sure and can help we can do it by pm.
Regards Paul

 

[MoodySabre]

I wondered that. As far as I know, you can't just send HMRC a cheque, you need to have a VATtable transaction to occur to pay VAT.

If it is being sold by a UK VAT registered business then the VAT is paid to the vendor.

 

[petem]

If it is being sold by a UK VAT registered business then the VAT is paid to the vendor.

True, I assumed (perhaps wrongly) that it was a brokerage boat.

 

[petem]

On the other hand, if we are talking about Spanish VAT then under Spanish law VAT-value is determined lawfully on look-up tables that give lower values than market value, so you get the effect you describe and there is no fraud. The boat is then not deemed VAT paid when it is imported to uk; it is actually VAT paid in free circulation in the EU.

Is that the 'blue book'? I remember looking at a Swiss non VAT paid boat and the IVA to make it VAT paid was surprisingly small.

 

[jfm]

As far as I'm aware John the boat was being traded in against another took in PX by a well known U.K. Dealer, not boats before you ask, before it left Spain its IVA ( a cert is available) was paid in Spain however in my view the boat was undervalued as I know the true value of this certain make and model of boat, tax was paid there no doubt because someone took advantage of a system that allows a lower calculation value therefore a lower amount is payable , I'm sure our hmrc wouldn't allow this to happen .
So if you would like to add and help me the question is, if my client buys this boat here in the U.K. He will not get a U.K. Vat paid invoice from history of the boat but we'll get an IVA cert showing the tax was paid in Spain around 2010 before it was shipped back to the U.K. In the deal around 2010.
If your still not sure and can help we can do it by pm.
Regards Paul

No need for PM. I can say this with certainty:

1. Once a boat is lawfully VAT paid in any EU VAT zone country, it is generally in free circulation in the EU VAT zone (which is slightly different from the EU, but let's ignore that)
2. Spanish law allows IVA to be paid on a value taken from a look-up table, even if that is less than open market value. If this happened the boat is lawfully VAT paid in Spain and it is irrelevant that the value used was less than market value
3. If the boat is then moved to UK and HMRC were to become aware, there is absolutely no way whatsoever they can assess UK VAT. They would know that and wouldn't even try. UK law would not permit the assessment. If HMRC were to dislike Spain's practice, (and they have had 20 years to think about it and have never apparently cared; it is very small beer), they have to raise the matter with the EC and not with individual boat owners. That isn't going to happen, and in any case wouldn't be retrospective

Your guy therefore seems to be in good shape under the actual law of Spain and UK, but not necessarily under the VAT Rules According To Internet Forums

 

[jfm]

Is that the 'blue book'? I remember looking at a Swiss non VAT paid boat and the IVA to make it VAT paid was surprisingly small.

It has lots of slang names. Obviously it isn't called blue book under Spanish law .

 

[jfm]

True, I assumed (perhaps wrongly) that it was a brokerage boat.

Whether it is a brokerage boat is entirely separate from whether the seller is VAT-registered. They're not mutually exclusive and are just not linked at all.

 

[jfm]

LOL, I believe that any prospective buyer who looks CAREFULLY on this forum would reach one and only conclusion, i.e. that it's better to buy a used boat with a "non-paid" (or unclear) VAT status, because that's a good argument for asking a price reduction...

:encouragement::encouragement:

 

[[2068]]

It sounds to me that if you were thinking about buying a large non-VAT-paid boat from outside the EU, then paying IVA in Spain followed by a move to "wherever" could be a good way to do it.