Vat Advice on buying a boat

[volvopaul]

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

Thank you for that John, much appreciated.

I'm off to find a ex vat paid boat in Spain .

 

[superheat6k]

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...

As JFM has said insufficient detail describing the actual circumstances, but generally when the VAT status is questionable most would be looking for a 20% reduction, not add on. Crazy !

If a broker is trying to charge VAT on a private broker arranged sale in this Country he might be breaking the law (HMRC rules and possibly even committing fraud). As I understand it VAT would be payable by the VAT entity selling or transferring it back into private ownership, but they would have to make it very clear this was a VAT chargeable event and provide the first buyer / recipient with a proper VAT invoice and account to HMRC that the funds collected had been passed on. So unless you are buying from a VAT registered business who is providing such an invoice then I doubt there is a chargeable event on your transaction, but the seller may have some explaining to do to HMRC if he did not pay VAT, and this is where particular care is required if the seller is perhaps a Director of the VAT entity that owned the boat. For my sanity I think I would contact HMRC and ask if the VAT invoice provided was kosher, but this might not make you popular with the seller !

However, if the boat is a stock boat he might be obliged to charge VAT if he is selling it as part of his business. A call to HMRC small craft unit might help, but once that call is made the 'blip' on their radar sticks around for quite a time.

 

[mainshiptom]

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.

The boat is in the west country, the boat was initially bought in Germany and for the last 12 years has been in this country to my understating. the broker "says" he wants to do the right thing and pay the VAT..

 

[jimmy_the_builder]

The boat is in the west country, the boat was initially bought in Germany and for the last 12 years has been in this country to my understating. the broker "says" he wants to do the right thing and pay the VAT..

Who's 'he' in this context - the owner, or the broker?

 

[longjohnsilver]

The boat is in the west country, the boat was initially bought in Germany and for the last 12 years has been in this country to my understating. the broker "says" he wants to do the right thing and pay the VAT..

I thought you were bringing an ugly boat back from Spain?

 

[superheat6k]

The boat is in the west country, the boat was initially bought in Germany and for the last 12 years has been in this country to my understating. the broker "says" he wants to do the right thing and pay the VAT..

This is very laudable, but your purchase, if from a UK (or presently EU) private citizen and assuming the transaction occurs in the UK, is not a VAT chargeable event. Are there prior bills of sale available from private citizens, as these add weight to the vessels likely VAT paid status. It is illegal to pay VAT when not due.

If there is any doubt over the VAT status then they should be considering a 20% deduction and no way should you be paying 20% extra out. There is no mechanism for the broker to pay the 20% to HMRC just because he feels he (you !) should.

When you purchase a boat normally the term "free of encumbrances and lien" is used. If they do offer a reduction in lieu of possible future VAT liabilities then they could add a clause to the effect save those of any future VAT payments.

This looks to me like a case of a Broker not understanding the VAT rules. I suggest you invite him to read Customs Notice 8.

If you like the boat the likelihood of a future VAT problem is very remote, but this can be an issue when it comes time to sell on, when the VAT question could arise again.

 

[mainshiptom]

Who's 'he' in this context - the owner, or the broker?

Broker

 

[jimmy_the_builder]

Broker

Ok. As said by others here, the broker has no right (or mechanism) to charge you any vat on the purchase price of the boat. Is the seller (not the broker) a vat registered entity?

 

[Tranona]

Broker

The transaction is with the owner, not the broker, who has no financial interest in the boat. If the owner is a private citizen, then it is not a chargeable event and therefore there is no VAT. If the owner is a VAT registered entity then it will have to account for VAT on the sale price. The fact that it came from Germany is largely irrelevant, it is in the EU.

From what you say the broker does not seem to have a clue - unless he has information about its history that he is not sharing.

 

[Hurricane]

Ok. As said by others here, the broker has no right (or mechanism) to charge you any vat on the purchase price of the boat. Is the seller (not the broker) a vat registered entity?

It seems to me that this is a key question.

 

[superheat6k]

It seems to me that this is a key question.

Indeed, but then assuming this seller is a VAT registered entity, then if selling goods in the EU primarily to private citizens it is I understand a legal requirement that an advertised price must either include VAT, or if the advertised price excludes a VAT charge then this must be clearly stated. It is IMHO unacceptable for the broker to simply add this on after a deal has been sealed.

Certainly in my trade business we are very careful that every priced proposal, estimate or quotation has at the end the wording "Prices shown exclude VAT" or "+ VAT"

As already stated a secondhand item cannot become Vatable just because the seller is not sure of its VAT paid status, as the OP has intimated. In this situation and IMHO it would be more prudent that the seller ensures he has declared this doubt openly (which it seems he has) and that due account of the (remote) possibility of a future VAT liability is accepted by the purchaser at the time of the purchase - normally this would mean a reduction in nominal value (Max 20%) when compared with the agreed price where established on a similar boat holding clear VAT paid status.

This means if the OP made his agreement in good faith that the boat was VAT paid when he sealed his deal with the seller, then the revelation it might not be VAT paid would entitle him to either withdraw or expect at least some reduction. The OP has not stated if the VAT situation had been explained prior to his offer being accepted, and this fact is crucial here.