VAT on a used boat

[Momac]

A boat built in the late 1990's is in the UK and for sale. But there is no documentation so no proof of VAT paid.

To dismiss the VAT concerns can a buyer pay VAT ? If so is the amount of VAT required calculated on the price paid for the used boat, or is VAT due on the price it would have been when new ?

Even with VAT paid is the absence of documentation still a barrier to a sale?

 

[neale]

Depends on the circumstances but if one private individual is buying a used boat from another private individual I don't see how VAT can be paid as it would not be a VATable transaction. If it was a VATable transaction, it would be paid on the amount of that transaction.

 

[neale]

I guess if you just phoned up HMRC and offered them some money they would probably find a way of accepting it but I really cannot for the life of me think of why you would.

 

[Momac]

I thought proof of VAT was an important matter . Particularly so if the boat should be taken out of UK waters.

 

[jfm]

You cannot just pay HMRC without a liability existing. If you wanted to create a liability, you and seller drive the boat outside the EU (12.1 miles off the coast etc), buy the boat there ie hand over the BoS, and drive it back flying a Q. Then you're importing it and can fill in the C-whatever form and pay the tax, and HMRC will accept the money and give you a VAT-paid docket. The tax will be 20% of the current value, not the new price way back when.

If you really want to ...

 

[jfm]

I thought proof of VAT was an important matter . Particularly so if the boat should be taken out of UK waters.

It is on internet forums

 

[superheat6k]

Suggest a fair price then reduce it 20% in lieu of a future VAT demand. Then if ever you are tackled you are not out of pocket. Why boat owners lose critical documents amazes me. Until you buy the boat this is the vendors problem, a problem the extent of which JFM hints may be overstated, but if it gets the price down then good for you.

Has anyone on here ever actually been put to task to prove VAT status on a secondhand item. past 7 years old As HMRC only require the company first selling the boat to maintain their records for 7 years I don't see how you can ever be forced to prove the vat status after 7 years, especially if you can show you bought it privately in the UK.

With OB I specifically enquired about full title at first viewing and was informed everything about the entire ownship chain was available including the original VAT invoice, although as the boat had been Part 1 registered this was straighforward as far as ownership was concerned. When close to completion said VAT invoice was not available I forced the price down as having this was an implicit part of the offer I had made. Then after I bought the boat I contacted Fairline who kindly provided me a copy from their files. A VAT Lawyer / Judge I showed it to would have accepted it as bonafide in his Court, as has the broker OB is now listed with.

 

[Andrew M]

If the op doesn't mind me chipping in, but it is related, we are just about to buy a boat that is here in the UK, it is currently Jersey registered and we are buying it from it's current owner's Uk company. We are buying via a large well known broker and have been trying to ascertain the technicality for us as buyers. Have been told it is all ok and the vendor will give us a VAT invoice to us from the company. Any of you experienced guys know what we should definiitely be looking for or simply if we have a genuine VAT invoice for our purchase , does that suffice ?

Thanks,

Andy

 

[jfm]

If the op doesn't mind me chipping in, but it is related, we are just about to buy a boat that is here in the UK, it is currently Jersey registered and we are buying it from it's current owner's Uk company. We are buying via a large well known broker and have been trying to ascertain the technicality for us as buyers. Have been told it is all ok and the vendor will give us a VAT invoice to us from the company. Any of you experienced guys know what we should definiitely be looking for or simply if we have a genuine VAT invoice for our purchase , does that suffice ?

Thanks,

Andy

It's ok so long as you are not stitched up. Check the co is indeed vat registered, ask to be given a proforma of the invoice you will actually get and make that an agreed form doc in the contract and a CP to completion. See if the boat belongs to the company by looking at the name on the registration and the company's accounts. If it is not a Uk registered company post that fact on here asap. For a bit more help post on here or PM the name of the company - the full precise name, precise to the letter.

 

[Andrew M]

Great, thanks. Have just looked at the Jersey register and that does appear to me (in my very limited knowledge) to be correct, as in, it's the name we have been shown we are getting the VAT invoice from ,and it's the name on the last BOS.

Andy

 

[Hurricane]

JFM
What protection would Andrew M have
I assume if the payment that he makes clears any outstanding account with the vendor, he would, effectively be paying for his boat including VAT
I am also assuming the the vendor's company is registered for VAT
Again, I assume that the vendor's company would then pay the VAT element to HMRC (i.e. 16.67% of the amount that Andrew M pays)
If I were Andrew M, I would be looking for a company invoice showing the VAT that the vendor's company would pay to HMRC
This would then be my future evidence of VAT

My main question is (and this is as I understand it)
HMRC will only collect from the vendor's company (assuming that this company is VAT registered)
I believe that Andrew M would not be liable as long as he has cleared any payments with the vendor.

As you always say - the devil will be in the detail - I'm sure

 

[jfm]

All that is correct Hurricane. Andrew has no liability to pay any tax. His only liability is his contractual liability to pay for the boat. If seller issues a vat invoice to Andrew the boat is VAT paid (subject only to the smuggling risk which will be far fetched in most cases and which can be partly covered off by an indemnity in the contract)

It doesn't matter if seller then fails to pay the vat to HMRC. That failure doesn't invalidate the vat paid status of thr boat. So andrew doesn't have to worry about whether seller paid the vat to HMRC or even whether seller accounted for the vat

When comet and woollies went bust the vat they owed to HMRC at the approaching month end won't have been paid in full. That doesn't mean HMRC can knock on the door of everyone who bought a TV or washing machine or bag of pick n mix in the final weeks of trading, and ask for the vat that comet/ woollies failed to pay. The shopping was all vat paid. It's the same with this boat

 

[Andrew M]

Great explanation, thanks guys, put like that it has instantly made me feel more at ease. Not that we thought anything too untoward existed , just haven't bought anything before in these circumstances.
Andy

 

[Poecheng]

Re Andrew M,

Andrew may I sound a word of caution which may do nothing other than display my ignorance. Let us just say I am very familiar with VAT (fraud) and consider I have a reasonable inside knowledge of how HMRC think and work. My work doesn't involve knowing VAT backwards - only certain parts - so again, if I am wrong, I apologise.

1.The boat is owned by a UK Ltd company and the boat is registered in CI. I presume therefore that presently no VAT has been paid on the basis that it is registered outside the EU and kept there. So it would seem it is not the case that it is a EU-based, genuine business/trading asset of the UK company upon which they have paid VAT on purchase and then reclaimed the VAT?? Treating a boat as a genuine business asset is very difficult to achieve with HMRC (for obvious reasons) unless you run a charter company or similar. I think you need to know the basis for it being ex VAT.

2. You say the boat is here in the UK. If I am correct about 1, has the boat been imported because, if so, the liability to pay VAT has already arisen?

3. You are being offered a VAT invoice from the selling company which I understand to mean the boat price plus VAT will be shown on the invoice. My query is whether this is properly a VATable transaction and why you are being charged VAT by the company.

4. If the VAT is paid to the company but the company does not pay it on to HMRC, I do not believe that HMRC will, in these circumstances, consider the matter at an end. The requirement is that the boat is VAT paid and that is a question of fact. When you hold the original VAT invoice from the boatbuilder that is good evidence that the VAT has been paid and/or any problems are lost in history/resolved. WHere the only evidence for (say) a 10 year old boat is a 2014 VAT invoice from A Ltd, that doesn't strike me as clear evidence VAT has been paid on the boat - just that you have been charged VAT. They are interested in the boat's VAT status not your's.

If the basis of the boat being ex VAT is that it is a non-EU boat then the liability arises on importation; that is a direct liability between owner and HMRC.
If the company is the importer and doesn't pay the VAT liability then your giving the company money against an invoice does nothing to extinguish the importer's liability to pay the VAT.
If you are deemed to be the importer then you pay HMRC; showing HMRC you paid a third party cannot and will not extinguish your liability (even if the third party is required to hand over the VAT charged on the invoice).

Even if most of the above is **** I consider the invoice alone to be very poor evidence of much in the eyes of HMRC; heaven knows what a) other jurisdictions would think or b) the person you want to sell it to.

If me, I would either discharge the VAT liability myself so that I got all the documentation. Alternatively I would make it part of the contract that the VAT amount be not released by the broker to the vendor unless and until documentary (Including banking) proof of receipt by HMRC was provided to you (and it should specify original documentation) within an agreed timescale in default of which the sum is returned to you.

 

[Momac]

It is on internet forums

Perhaps so.

But I am sure VAT status is also of interest to brokers. We traded in our last boat and it was conditional on the paperwork being all present and correct.

I have also read about people who take their boats abroad needing to have their original paperwork.

 

[Hurricane]

Poecheng

It would be interesting to hear JFMs comments on your post

I'm too - no expert.

Your para no4 is exactly the point of my earlier post.
I think, taken in isolation, your point no 4 is wrong.
However, the whole case is "muddied" by the import issue.
If the boat were in EU waters, I think the matter would be more straight forward but it seems to me that Andrew M might get caught for importing a boat into the EU
I see this as a totally different case to VAT on a sales transaction.
Devil and detail again.

Again, I am definitely no expert.

 

[neale]

I have also read about people who take their boats abroad needing to have their original paperwork.

Martyn

The only cases I have ever heard of, and these were all second or third hand, seem to relate to southern Europe. I have cruised extensively in the English Channel between the Netherlands and Brittany. I have been stopped by Dutch, French and Belgium customs for document checks. I have been backwards and forwards in and out of the EU (Channel Islands) many many times. I have done this in a variety of boats from an old sub £10K Bayliner up to Brand spanking new 40 odd foot flybridge boats. All they have ever been interested in is the registration document (SSR or Pt 1) and passports for all on board.

I have never ever been asked for proof of VAT payment.

The only time the subject ever came up was when my Bayliner broke down in Guernsey and I had it shipped back as deck cargo. Customs at Weymouth thought I might be importing it from Guernsey, and started talking VAT. When I explained the story and showed them my SSR paperwork they were more than happy and let me on my way. I did not have any proof of VAT payment on that boat.

I would certainly not worry about proof of VAT on a used boat, especially one from the 90's

 

[Poecheng]

Poecheng

It would be interesting to hear JFMs comments on your post

That's what I was worried about when I posted Thought I might get blown out of the water (politely)

I think one way or another if VAT is being handed over now in order to discharge a VAT liability (whether because it is ex VAT or because it is being imported) it is not unreasonable to require proof of payment to HMRC of that VAT.

I did, in about 2007, look at a boat where I was told by the vendor that he held the original VAT invoice and I made it a condition of purchase. When it came to inspection of the documents he held only a poor photocopy. Not good enough for me. He was then in contact with the previous owner who, he told me, wanted £1,500 or thereabouts for the VAT invoice and would not just hand it over.
Therefore I make sure that any purchase is conditional on provision of the original VAT invoice.
I might be too fussy about this - I accept that.
As Neale say, demand for proof is very rare. However, the problem is ironically less from the Revenue and their equivalent but rather from the next purchaser. One may be pretty sanguine about the risk of getting done for the VAT but you cannot demand that the purchaser holds the same attitude.

 

[jfm]

Re Andrew M,

Andrew may I sound a word of caution which may do nothing other than display my ignorance. Let us just say I am very familiar with VAT (fraud) and consider I have a reasonable inside knowledge of how HMRC think and work. My work doesn't involve knowing VAT backwards - only certain parts - so again, if I am wrong, I apologise.

1.The boat is owned by a UK Ltd company and the boat is registered in CI. I presume therefore that presently no VAT has been paid on the basis that it is registered outside the EU and kept there. So it would seem it is not the case that it is a EU-based, genuine business/trading asset of the UK company upon which they have paid VAT on purchase and then reclaimed the VAT?? Treating a boat as a genuine business asset is very difficult to achieve with HMRC (for obvious reasons) unless you run a charter company or similar. I think you need to know the basis for it being ex VAT.

2. You say the boat is here in the UK. If I am correct about 1, has the boat been imported because, if so, the liability to pay VAT has already arisen?

3. You are being offered a VAT invoice from the selling company which I understand to mean the boat price plus VAT will be shown on the invoice. My query is whether this is properly a VATable transaction and why you are being charged VAT by the company.

4. If the VAT is paid to the company but the company does not pay it on to HMRC, I do not believe that HMRC will, in these circumstances, consider the matter at an end. The requirement is that the boat is VAT paid and that is a question of fact. When you hold the original VAT invoice from the boatbuilder that is good evidence that the VAT has been paid and/or any problems are lost in history/resolved. WHere the only evidence for (say) a 10 year old boat is a 2014 VAT invoice from A Ltd, that doesn't strike me as clear evidence VAT has been paid on the boat - just that you have been charged VAT. They are interested in the boat's VAT status not your's.

If the basis of the boat being ex VAT is that it is a non-EU boat then the liability arises on importation; that is a direct liability between owner and HMRC.
If the company is the importer and doesn't pay the VAT liability then your giving the company money against an invoice does nothing to extinguish the importer's liability to pay the VAT.
If you are deemed to be the importer then you pay HMRC; showing HMRC you paid a third party cannot and will not extinguish your liability (even if the third party is required to hand over the VAT charged on the invoice).

Even if most of the above is **** I consider the invoice alone to be very poor evidence of much in the eyes of HMRC; heaven knows what a) other jurisdictions would think or b) the person you want to sell it to.

If me, I would either discharge the VAT liability myself so that I got all the documentation. Alternatively I would make it part of the contract that the VAT amount be not released by the broker to the vendor unless and until documentary (Including banking) proof of receipt by HMRC was provided to you (and it should specify original documentation) within an agreed timescale in default of which the sum is returned to you.

In a bit of hurry her P so briefly:
1. You cannot presume that from the facts given. Offshore registration is, with one exception not applicable here, irrelevant to vAT. And OP ha already said the boat is physically in UK (RTFQ!)

2. Ah, ok, now you note that it is in UK. If it has been imported from outside the EU then import VAT may be due. OP has to dig into the facts and establish the boat's import history

3. There is no risk to buyer if seller issues a VAT invoice in error

4. That is just not correct on several levels. When you buy a TV or a car or a sofa or a packet of sweets, do you care whether the seller pays the VAT to HMRC? You don't, because even if the retailer defaults your goods are still VAT paid in free circulation with a VAT invoice. Indeed, VAT payments to HMRC cannot in law be hypothecated to specific transactions that gave rise to the liability. People who bought goods from Comet in the week before they went bust cannot be chased by HMRC for the VAT Comet didn't pay to HMRC at the end of that month

Ref "...the liability arises on importation; that is a direct liability between owner and HMRC." - not quite. It is a liability of the importer but is "mortgaged" in law on the boat. HMRC don't usually enforce against an innocent 3rd party but they can and the law allows it.

"f the company is the importer and doesn't pay the VAT liability then your giving the company money against an invoice does nothing to extinguish the importer's liability to pay the VAT." Correct

" If you are deemed to be the importer then you pay HMRC" there is no law in the UK that can ever deem you to be the importer. In ths scenario, OP isn't the importer.

I'm not saying this boat is squeaky clean though

 

[Andrew M]

Thanks guys, some brilliant thought provoking stuff for me here, really appreciate the comments.

Andy

JFM: I am trying to pm you but am getting a "msg box full" returned, can email you if better?