VAT and chartering

[Memphis_Chung]

Hi,

My understanding is that if I purchase a yacht which is ex VAT from say, Jersey, I will have to pay VAT which I can reclaim if I set up a charter company and charter her out from time to time (most likely via a charter management company). My question is this: what happens when the time comes to sell the boat on? Is VAT payable by the next owner?

As an aside, does anyone have experience of chartering their boat - my intention would be to do it on a very limited basis - Cowes Week for instance when I like to avoid the Solent! If I could cover a mooring, it could be very appealing!

Thnks!

 

[dt4134]

I looked into it a bit a couple of years ago.

If you're VAT registered when you buy the boat you don't pay VAT on it. When you sell you (not the purchaser) have to account for the VAT to HMRC so you have to set the price accordingly to include the VAT.

You could also take it as a personal asset when you stop chartering it, but you'd still have to pay VAT on whatever valuation you agree with HMRC. I'd talk to an accountant if you have that in mind.

Good idea to discuss this with HMRC when you register for VAT. When you say yacht they have in mind something a multi-millionaire would own. They're also very suspicious of the Sunsail type schemes. However I found they were OK after a few letters to explain the details. Never went ahead with it in the end.

I believe you can also claim back some VAT if your VAT-registered business purchases a VAT-paid second-hand boat, but again best talk to an accountant.

Edited:

PS if you charter it out only occasionally you may have to pay VAT on the proportion deemed for personal use. Or pay tax as a benefit in kind. Definitely talk to an accountant about that bit.

 

[Tranona]

Don't even think about it! You will have to show that it is a business for both VAT and Inland Revenue purposes and if you use it privately you will be taxed for benefit in kind. You will also find that HMRC will expect to see that you are actually running a business - advertising and promoting your boat, taking bookings doing the handover - in fact all the things that make it a PITA.

HMRC are very hot on this for obvious reasons. If you want to earn a few bob to help with your bills then just do it - after you have coughed up the not inconsiderable sum required for most boats to have it coded and paid the inevitably higher insurance premiums - which will eat into any "profit" you make.

When you go into all the ins and outs you will discover why most charter boats are run by "proper" businesses - even if the boat is owned by an individual.

You could talk to the charter management companies who will be able to advise if it is worth putting your boat with them.

 

[SirSnoozalot]

You can reclaim the VAT on a boat purchased for commercial use. It needs to be sold to you by a VAT registered person whom can give you a VAT receipt. If you "import" from the CI, HMRC give you the VAT invoice when you pay it. You then have to charge VAT on it when you sell it, and on all your charters.

However, if you also use it for any personal non-commercial use, you cannot then claim the VAT back. They will kick very hard if you do this. Tranona is right.

If, you take less than the VAT threshold on your charters, the advantage is not to register, as your price can then be more competitive than that of a charterer who also has to charge VAT on their prices. You still need to declare to HMRC, based on your profit from chartering, but unless you do a lot of chartering, your costs and capital allowances can largely offset any profits.

Another idea, if you want to avoid paying the VAT is to keep the boat in the CI. And then only "visit" the UK with it. You are allowed certain time in mainland UK as a visitor, under temporary import, if your charter office is domicilled in CI.

 

[Memphis_Chung]

Thznk you both for responding. More thought required I think!