Vat on a home build boat question

[Jonmendez]

If anyone can advise as to the Vat status when you build a boat from scratch? I have an owner who has built his own boat from scratch - very impressive it is and he is getting it CE marked and RCD compliant but has struck a blank with its Vat status, I think I read somewhere that if he kept it for 5 years it would then be deemed Vat paid but if he sold it within that period he would need to pay Vat on its value? Can anyone shed any light?? The local Vat office were no help at all so I ask for the forums expertise. Many thanks Jon

 

[ARA]

Is he a VAT registered business?
If so has he claimed VAT back on the materials used to build the boat ?
If he sold it what would the value be?

 

[jfm]

If anyone can advise as to the Vat status when you build a boat from scratch? I have an owner who has built his own boat from scratch - very impressive it is and he is getting it CE marked and RCD compliant but has struck a blank with its Vat status, I think I read somewhere that if he kept it for 5 years it would then be deemed Vat paid but if he sold it within that period he would need to pay Vat on its value? Can anyone shed any light?? The local Vat office were no help at all so I ask for the forums expertise. Many thanks Jon

The crucial question is whether he has built it in the course of a boat building business. I will assume he hasn't, and that he is just a very good diy-er, and that he has not recovered any VAT paid by him on the materials that he bought to build the boat. But that is a very big assumption on my part: if he is in fact carrying on a boat-building business in the eyes of the law the VAT answer is totally different from what I write below

The boat is already VAT paid (so far as that phrase has any legal precision, which isn't much). He can sell it to whomever he likes and no VAT is payable on that sale and the new owner will not face any requirement to pay VAT. What your friend needs to do to prove this is to keep a good file of all the VAT receipts on the parts and materials bought for the boat, and this file can be passed to the next owner.

The 5 years thing you mention is a total red herring, totally wrong. There is no 5 year rule remotely like that. The boat will never be deemed VAT paid and the current owner need not pay any VAT whether he sells it now or in 5 years or 500 years.

All that said, and retruning to my first paragraph above, if he sells the boat now when it is brand new and newly CE marked, he is going to have a hard time proving to HMRC that he is not running a boat-building business. Much easier on this aspect to sell the boat when it is properly secondhand. If he were to sell the boat now when it is new, then build another, he is almost certain to be engaged in a boat building business in the eyes of the law

 

[ARA]

JFM, if he isn't VAT registered & his turnover is below the VAT threshold ....something like 73 thousand pounds per annum .... then he can sell as many as he likes surely ? If they are 40 foot + top notch cruisers fully equiped then he will get a lot of enquiries if his prices don't hit that threshold.

 

[boatmike]

If anyone can advise as to the Vat status when you build a boat from scratch? I have an owner who has built his own boat from scratch - very impressive it is and he is getting it CE marked and RCD compliant but has struck a blank with its Vat status, I think I read somewhere that if he kept it for 5 years it would then be deemed Vat paid but if he sold it within that period he would need to pay Vat on its value? Can anyone shed any light?? The local Vat office were no help at all so I ask for the forums expertise. Many thanks Jon

Jon,
Having built my own I can tell you that if he can produce VAT paid reciepts for major items (mouldings, engines, mast etc) and has good evidence that he built the boat himself then he is home and dry. The 5 year ruling you are thinking of may be the CE marking and certification which is not required if the boat was completed and launched 5 years before it is sold.

 

[jfm]

JFM, if he isn't VAT registered & his turnover is below the VAT threshold ....something like 73 thousand pounds per annum .... then he can sell as many as he likes surely ? If they are 40 foot + top notch cruisers fully equiped then he will get a lot of enquiries if his prices don't hit that threshold.

Yes that's correct ARA. I was assuming >£73k becuause I'm a bit addicted to big boats but i see your point and thanks for the correction.

So if the guy is carrying a business of making boats, and if the sales price of this boat is <£73k, and the guy's LTM turnover 12 months is <73k, and he is not otherwise required to be VAT registered, and he is not actually VAT registered, then the boat is automatically "VAT paid" even though no VAT has been paid on it, and the invoice the guy should give to the buyer should state something along the lines of "Outside the scope of VAT because seller is not, and is not required to be, VAT registered".

 

[Jonmendez]

Vat on a self build

Hi guys thanks for all the answers, yes it a home build, ( he is very clever) yes it is a one off and yes he wants to keep it for several years, so in theory if / when he sells it - it will be Vat paid. I will forward him all this and I know that he has kept all the bills so all should be great!
Wish they were all this simple!

 

[Tranona]

This subject is well covered in the VAT FAQ document on the RYA website (under Legal)

 

[jfm]

Hi guys thanks for all the answers, yes it a home build, ( he is very clever) yes it is a one off and yes he wants to keep it for several years, so in theory if / when he sells it - it will be Vat paid. I will forward him all this and I know that he has kept all the bills so all should be great!
Wish they were all this simple!

Good one - job done then

Separately this sounds a nice project. Could you persuade him to put pics on here? We'd love to see his project. We haven't seen a home build close up since Cookee's rocket ship and we all like boat-in-build stories
[/Geeksville]

 

[Cookee]

Good one - job done then

Separately this sounds a nice project. Could you persuade him to put pics on here? We'd love to see his project. We haven't seen a home build close up since Cookee's rocket ship and we all like boat-in-build stories
[/Geeksville]

Oi! "Cookee's rocketship isn't a home build! We do it for a business (VAT registered and everything!).

The good news is that there is no CE for race boats

As for the original question, I agree that it would be VAT free under those circumstances and proof of VAT paid would be VAT invoices for the large items. You can get any boat CE certified as a one off, some surveyors will do it as will the RYA.

 

[Red]

One advantage of owning a listed property - grade 2, is that you can claim back VAT on any property maintenance or enhancement costs. Has your mate considered applying to have his vessel listed as a national monument.......

 

[colhel]

Good one - job done then

Separately this sounds a nice project. Could you persuade him to put pics on here? We'd love to see his project. We haven't seen a home build close up since Cookee's rocket ship and we all like boat-in-build stories
[/Geeksville]

A friend of mine is doing a homebuild, it's a 54 feet long steel ketch (raggie) absolutely stunning. And unfortunately very difficult to photograph. Hope it's okay to post a raggie picture here?

 

[jfm]

Oi! "Cookee's rocketship isn't a home build!

I know! Was pulling your leg (see smiley!)

 

[jfm]

A friend of mine is doing a homebuild, it's a 54 feet long steel ketch (raggie) absolutely stunning. And unfortunately very difficult to photograph. Hope it's okay to post a raggie picture here?

Wow that looks amazing. Post as many pictures of that as you like! What hull has he used?

 

[colhel]

It's based on a Bruce Roberts, though he has done many of his own modifications, mainly to the coach house roof and enlarged the cockpit.

 

[jfm]

Quite a machine then when done...

 

[benjenbav]

Quite a machine then when done...

Mmm, wouldn't say no to one of those.

 

[colhel]

I'm a little reluctant to post anymore pictures because I haven't sought the builders permission, hopefully the ones posted just give an insight without bereaking any confidences.
I'll try and speak to him and if he's agreed, post some more specs.
Hopefully hidden in A VAT thread shouldn't arouse too much attention.