VAT on boats

[Tranona]

There really is a lot of nonsense being peddled here. Post#7 is completely wrong. You can bring a UK VAT paid boat back to the UK IF you were the person who took it out within notionally 3 years of taking it out without paying VAT and it remains VAT paid in the UK. Up to 31/12 2021 the 3 years does not apply. If you have bought the boat in the EU even if the VAT was paid in UK you cannot use RGR and VAT is payable. In both cases the boat is no longer EU VAT paid even if it was in the EU on 31/12/20. You may however be able to use returning residents relief IF you are now permanently resident in the EU and are relocating permanently back to UK. The boat could then form part of your chattels, but there are stringent limiting conditions.

There is no problem taking it back into the EU but the boat is then subject to TA rules. Taking it back does not re-instate EU paid status, it remains a third country boat. So the idea that you can pop over to Cherbourg every 3 years and retain both EU and UK status is just nonsense.

To clarify other bits of potential misinformation. The state of registry is not relevant. The tax status of the owner is not relevant. The residence of the owner is not relevant (except for returning residents). The citizenship of the owner is not relevant.

Clearly although the principles are simple and clear, how they apply to specific boats may vary. For example as the OP took the boat to France he can bring it back under RGR rules, but if he had bought it in France he could not.

There is nothing new about this. It has been known in the public domain for 4 years that these rules (or something similar) would apply when the transition period was over, although the details of RGR implementation, particularly the 1 year grace was not fully sorted until recently.

 

[John100156]

There is some useful information given in the following link that may be of interest, it mentions RGR TA etc.:

H&V Yachting manage customs and tax compliance Solutions (hv-yachting.com)

My understanding (as a total novice in this matter) is as Tranona says, I have bought a boat in Spain, UK VAT Paid and a T2L to show VAT paid and EU Goods Status but I cannot take advantage of RGR as I was not the owner of the boat when it was imported (or moved as we were in the EU) to France and then Spain.

If I keep it in the Med no problem, which is my intention anyway and it therefore remains as EU VAT paid status, as I understand it.

I will probably sell the boat in the Med., and assume if I do, it will also remain so, to the new buyer.

I assume I would incur import duty/VAT if I wanted to return it to the UK.

 

[j24jam]

There is some useful information given in the following link that may be of interest, it mentions RGR TA etc.:

H&V Yachting manage customs and tax compliance Solutions (hv-yachting.com)

My understanding (as a total novice in this matter) is as Tranona says, I have bought a boat in Spain, UK VAT Paid and a T2L to show VAT paid and EU Goods Status but I cannot take advantage of RGR as I was not the owner of the boat when it was imported (or moved as we were in the EU) to France and then Spain.

If I keep it in the Med no problem, which is my intention anyway and it therefore remains as EU VAT paid status, as I understand it.

I will probably sell the boat in the Med., and assume if I do, it will also remain so, to the new buyer.

I assume I would incur import duty/VAT if I wanted to return it to the UK.

Correct

 

[John100156]

What I find most amazing - is that, if I wanted to bring my own originally UK VAT paid boat purchased in the UK and VAT paid to HMRC, back to my place of residence in the UK, with no sales or other transaction having taken place on which VAT would normally be chargeable, how on earth can they ask for VAT to be paid again?

I am keeping my boat in Med., so not overly concerned and I sold my last two boats in the Med., so would do so again if ever I wanted to sell, just don't get the above although I know it to be true!

 

[DavidJ]

What I find most amazing - is that, if I wanted to bring my own originally UK VAT paid boat purchased in the UK and VAT paid to HMRC, back to my place of residence in the UK, with no sales or other transaction having taken place on which VAT would normally be chargeable, how on earth can they ask for VAT to be paid again?

I am keeping my boat in Med., so not overly concerned and I sold my last two boats in the Med., so would do so again if ever I wanted to sell, just don't get the above although I know it to be true!

Yep!
I‘m in the same boat as you, so to speak.
and with the risk of setting this hare going again, if you did buy your second UK VAT you would then loose your EU VAT.

 

[hullabaloo]

What I find most amazing - is that, if I wanted to bring my own originally UK VAT paid boat purchased in the UK and VAT paid to HMRC, back to my place of residence in the UK, with no sales or other transaction having taken place on which VAT would normally be chargeable, how on earth can they ask for VAT to be paid again?

If you sailed your boat back into the UK, as apposed to having it transported back to the UK, with your original uk vat paid invoice in your back pocket,
who would notice ?
All said and done the vat was paid and it does seem a pi55 take paying uk vat twice.

 

[Tranona]

It is worth pointing out again that VAT is NOT a tax on assets, but on transactions. The reason why importing a boat is classed as a "chargeable event" and therefore subject to VAT is to ensure a level playing field. Imagine if US builders could import boats into the EU (or UK) without paying VAT they could undercut domestic (single market as was) producers by 20%.

So the tax is levied on the value of the transaction not on the boat itself and is effectively an import tariff. I know that paying VAT for a second time seems unfair on a previously VAT paid boat, in reality it has been like that for nearly 30 years so should not come as a surprise. Equally the reliefs available mean that the number of people (and boats) it affects is likely to be extremely small. One would like to think that anybody investing thousands or hundreds of thousands in a boat intending to use it outside the UK would make it their business to find out the implications of that decision. Particularly so for the last couple of years since exit from the EU became inevitable and the new rules widely publicised.

For many who own boats kept in the Med, particularly MOBOs EU VAT paid status is not an issue as the market when the time comes to sell is likely to be better there than in the UK. I do foresee, however some resistance from some EU buyers uncertain about the status of a boat which only has evidence of actual VAT payment by way of a UK invoice. Those who have acquired evidence of their boats location on 31/12/2020 by such means as a photo or a letter from their marina have made a smart move. Hopefully brokers and lawyers will get themselves up to speed with the new rules, although no doubt there will be a few run ins with local officials in some states!

Those of us of a certain age remember all of this from the days of the establishment of the single market and EU wide VAT system which raised exactly the same issues for some boat owners. The big difference now is that the UK is leaving the system after 30 years and many more people have their boating lives built around free movement of people and free circulation of EU VAT paid private boats.

 

[Tranona]

If you sailed your boat back into the UK, as apposed to having it transported back to the UK, with your original uk vat paid invoice in your back pocket,
who would notice ?
All said and done the vat was paid and it does seem a pi55 take paying uk vat twice.

Simple. That would be illegal. Now when entering the UK with your boat you are legally required to notify HMRC who then may inspect you and your boat. This will be via the C1331 form although I understand that there are plans to do this on line. If you did evade customs you may well have difficulty selling your boat if there is evidence it has been outside the UK since 1/1/2021. Last time around there were many examples of customs impounding illegally imported boats, particularly from the US. It is less of an issue if you and your boat qualify for one of the reliefs (and irrelevant whether it comes back on a truck or by sea), but a very silly move to try it with an EU VAT paid boat, either because it was originally paid in the EU or you bought the boat from the previous owner who took it out of the UK.

 

[Hurricane]

There really is a lot of nonsense being peddled here. Post#7 is completely wrong. You can bring a UK VAT paid boat back to the UK IF you were the person who took it out within notionally 3 years of taking it out without paying VAT and it remains VAT paid in the UK. Up to 31/12 2021 the 3 years does not apply. If you have bought the boat in the EU even if the VAT was paid in UK you cannot use RGR and VAT is payable. In both cases the boat is no longer EU VAT paid even if it was in the EU on 31/12/20. You may however be able to use returning residents relief IF you are now permanently resident in the EU and are relocating permanently back to UK. The boat could then form part of your chattels, but there are stringent limiting conditions.

There is no problem taking it back into the EU but the boat is then subject to TA rules. Taking it back does not re-instate EU paid status, it remains a third country boat. So the idea that you can pop over to Cherbourg every 3 years and retain both EU and UK status is just nonsense.

To clarify other bits of potential misinformation. The state of registry is not relevant. The tax status of the owner is not relevant. The residence of the owner is not relevant (except for returning residents). The citizenship of the owner is not relevant.

Clearly although the principles are simple and clear, how they apply to specific boats may vary. For example as the OP took the boat to France he can bring it back under RGR rules, but if he had bought it in France he could not.

There is nothing new about this. It has been known in the public domain for 4 years that these rules (or something similar) would apply when the transition period was over, although the details of RGR implementation, particularly the 1 year grace was not fully sorted until recently.

Ahh - I see your point now.

So, a boat with current free movement in the EU (VAT paid and in EU waters on the 31st Dec 2020) remains that way (VAT paid) until it leaves EU waters.
An EU resident can take it out of EU waters but must bring it back within 3 years for it to keep its free movement VAT status.
If the owner of that boat is NOT an EU resident, he can't take it out of EU waters and bring it back to the EU without using TA rules when it returns (3 years not relevant).
Is that what you are saying?
This is an important twist that we haven't been considering.

 

[Irish Rover]

I can't find anything about residency requirements... will talk with colleagues tomorrow and see what we find.

Please do that and could I suggest you amend your #33 accordingly after you've finished checking. In my view it makes no sense that only UK residents could claim this relief and I've never heard the term "VAT resident" which you used in your post.
Pay less import duty and VAT when re-importing goods to the UK
Claiming relief for pleasure craft

Pleasure craft returning to the UK under this relief must complete a customs declaration and use customs procedure code 61 23 F01.

Find out more information about sailing your pleasure craft to and from the UK.

 

[John100156]

It is worth pointing out again that VAT is NOT a tax on assets, but on transactions. The reason why importing a boat is classed as a "chargeable event" and therefore subject to VAT is to ensure a level playing field. Imagine if US builders could import boats into the EU (or UK) without paying VAT they could undercut domestic (single market as was) producers by 20%.

So the tax is levied on the value of the transaction not on the boat itself and is effectively an import tariff. I know that paying VAT for a second time seems unfair on a previously VAT paid boat, in reality it has been like that for nearly 30 years so..

I for one am grateful for the time you have taken to explain this, but I do find it grossly unfair. I get the logic for a boat builder having unfair advantage, but we are talking of a second hand boat owner, from what you say (and I believe it to be so) the act of importing back into the UK is seen as the transaction but no sale or other money is payable or changed hand on which the VAT is applied.

Would it not be better to rename it DTT (Dick Turpin Tax) at least then you know you are being robbed,?

 

[John100156]

Fortunately, we took photos in Sant Carles and have a letter from the Marina confirming the boat was on its berth on 31/12/20. With the T2L and original sales invoice I am reasonably happy as I am unlikely to travel out of the Med., it just seems unfair!

 

[DavidJ]

If the owner of that boat is NOT an EU resident, he can't take it out of EU waters and bring it back to the EU without using TA rules when it returns (3 years not relevant).

That makes popping into Gibraltar from Spain interesting

 

[j24jam]

Please do that and could I suggest you amend your #33 accordingly after you've finished checking.

Have done... can't find anything on residency rules for RGR

 

[j24jam]

That makes popping into Gibraltar from Spain interesting

Quite!

 

[John100156]

I thought VAT was a percentage on a sales transaction (UK VAT 20%) so if there is no financial transaction, in the event my boat is brought back to the UK, that's 20% of £0 which I am happy to pay (of course I know that will not happen).

Otherwise, whom is responsible for valuing the boat on which the additional VAT charge is to be levied? It will have devalued since purchased and its value surely needs to reflect its current condition, or is that not the case?

What if I take a £60k VAT paid (in UK) car from the UK into the EU and back again?

Surely they will have to rename it: Import Duty and DTT.

 

[j24jam]

whom is responsible for valuing the boat on which the additional VAT charge is to be applied?

It is based on current market value, the owner declares a value to HMRC on import. They will either accept it or challenge it...

 

[John100156]

Yes that what I expected, but how long do I wait for a decision if challenged? Hypothetically, say my mechanic tells me my engines need replacing in his opinion, do I deduct £64k from the boat value and seek to justify that? Get several engineers reports from others I suppose, whilst my boat is held somewhere in the ether.... of course the HMRC will insist its my responsibility. I am banging on a bit now and I suspect we shall in the next year or so, C19 permitting, hear of all sorts of stories on this.

 

[st599]

I thought VAT was a percentage on a sales transaction (UK VAT 20%) so if there is no financial transaction should my boat be brought back to the UK, that's 20% of £0, which I am happy to pay. Of course I know that will not happen. Otherwise, whom is responsible for valuing the boat on which the additional VAT charge is to be applied? It will have devalued since purchased and surely needs to take into account its condition? What if I take a £60k car into the EU and bring it back. They will have to rename it DTT.

HMRC have an algorithm that predicts depreciation on goods.

Taking a car in to the EU is different. An EU resident can't legally drive a non-EU registered vehicle so there's not much import goes on, or if you do, you use an agent. (That's why at Geneva airport you can hire EU or Swiss registered cars)

 

[Tranona]

Ahh - I see your point now.

So, a boat with current free movement in the EU (VAT paid and in EU waters on the 31st Dec 2020) remains that way (VAT paid) until it leaves EU waters.
An EU resident can take it out of EU waters but must bring it back within 3 years for it to keep its free movement VAT status.
If the owner of that boat is NOT an EU resident, he can't take it out of EU waters and bring it back to the EU without using TA rules when it returns (3 years not relevant).
Is that what you are saying?
This is an important twist that we haven't been considering.

Not quite. It depends on where you take it. If you bring it back to the UK under RGR it loses its status. If you take it to Morocco (or any other non UK third country, even the Channel Islands) you can take it into the EU under RGR. So in practical terms now you have an EU VAT status boat, your options are limited if you are still a UK resident as you can only bring it back to the UK if you are prepared to swap your boat's EU status for UK status. In reality though, as I suggested earlier it will almost certainly be easier to sell in the EU. Anybody interested in buying a (used) boat like yours in the UK for use in the med would be forced to pay EU VAT and transport to get it to there.

That illustrates the main casualty of Brexit for boaters - the trade in used boats to and from the UK and EU has been killed stone dead. So owners of boats now in the UK effectively have lost the opportunity to sell their boat to an EU buyer. However in the future (with my optimistic Boris hat on) the UK will be so successful that the £ will strengthen back to the 1.50 euros that it was a few ago and UK buyers will ,be able to plunder boats from the cheap EU (even with paying VAT) just as the euros have been doing to the UK in recent years.