Vat Paid Invoice????

[Nautibusiness]

VAT and foreign customs.

Personally I am aware of only one incident (first hand) and heard the rumours of many others where Customs asked for VAT proof.

The first hand incident was with an older, large, Trader in a Spanish port. Spanish officials demanded proof of VAT payment and when it couldn't be provided it was charged on the value of the boat at that time.
I've seen and read through the paperwork as this boat was due to come on brokerage with me at the time. It now has a nice document stating how much VAT was paid and when, but no original invoice... hence the document.

My own knowledge / understanding (or lack of understanding if I take Tranona correctly) is taken from what I've been "taught" on the ABYA course.

I know that some of you appear to take this information with a pinch of salt, but ABYA do basically set the rules that I am expected to work by. I have a statement about VAT from their CEO which she kindly provided when I asked about this thread. Assuming she offers permission for me to post the statement publicly (it was in a private email) then I shall post it.
Some of you may poo poo the information, but any responsible UK broker will be expected to work to the guidelines that are offered. They are guidelines, but based around fact.

Tom

 

[Nick_H]

If somebody was able to "claim back" VAT they would be VAT registered. Therefore when they sold the boat they would have to charge VAT and account for it. Failure to do that is an offence committed by them, not the buyer.

I think the main risk for UK boaters is the proximity of the Channel Islands. Your statement above isn't correct if they sell it to someone in the Channel Islands. That buyer doesn't have to be resident in the CI's, he just has to take delivery there, and can then sail it back to the UK, and he has an imported boat which is unlikely ever to be checked, so it's a tempting crime for some i'd have thought. When he sells it on, it seems the new buyer is at some risk, if customs subsequently investigate the previous buyers affairs and find something fishy.

What's a bit laughable, is that it's still possible for the seller to have an original VAT invoice in that scenario (if first buyer paid VAT then claimed it back), so actually getting a VAT invoice doesn't really protect you from the most likely risk you will face, that of an imported boat. I agree its not a big risk, but only because most people are honest.

 

[Deleted User YDKXO]

In the examples in your first paragraph, any boat that left the EU and VAT was either not paid or reclaimed, and came back is liable to VAT and the person who imports it is responsible. Nothing new there. If a VAT registered company (say a charter operator) was able to treat VAT as an input tax, as most do, then sold the boat to a private owner he (the seller) would have to account for VAT and there would be a VAT invoice for that transaction. If he did not accout for it correctly, he has committed the offence and not the buyer

Er, so? That's stating the bleedin' obvious

As to finance houses, there is no rational reason why they should need to see proof of VAT, unless there are grounds for believing there has been an offence, for example an imported boat. I can undertand their reluctance as the HMRC "advice" does not appear to have been tested, so it is easier for them to hide behind that. I suspect they lose very little business, because as you say it is "easy" to buy a boat with the full documentation, if the boat is relatively new and probably high value. Like you I would be suspicious of a lack of documentation, simply because that might suggest all is not right elsewhere. But there are still thousands of boats where the owners do not have that "proof" and will never be able to get it, but there is nothing to suggest that VAT was not paid

I've given you the rational reason

Look, before we get into a long and boring exchange of posts as I have other more important things to do today, let's just agree the following

1. There is no legal reason why the owner of a secondhand boat should have proof of VAT paid document.
2. Rightly or wrongly marine mortgage companies ask for proof of VAT paid documentation because they think it has a bearing on the value of a boat
3. Rightly or wrongly, there is anecdotal evidence that some foreign customs are asking to see proof of VAT payment

Based on the above, I think having proof of VAT paid documentation is worth having and you don't. End of

 

[Nautibusiness]

As to finance houses, there is no rational reason why they should need to see proof of VAT,

Possibly, "No Reason", but you won't get a marine mortgage without an original invoice.

But there are still thousands of boats where the owners do not have that "proof" and will never be able to get it, but there is nothing to suggest that VAT was not paid.

And sadly any savvy buyer will knock off the value of the VAT when negotiating.
Of course, the seller doesn't have to accept, but with a buyer in front of him....

 

[Deleted User YDKXO]

Personally I am aware of only one incident (first hand) and heard the rumours of many others where Customs asked for VAT proof.

The first hand incident was with an older, large, Trader in a Spanish port. Spanish officials demanded proof of VAT payment and when it couldn't be provided it was charged on the value of the boat at that time.
I've seen and read through the paperwork as this boat was due to come on brokerage with me at the time. It now has a nice document stating how much VAT was paid and when, but no original invoice... hence the document.



Tom

Was that incident in Soller, Majorca because there was a rumour about the local customs impounding a boat there last summer because of lack of VAT documentation during the matriculation tax purge?

 

[Nautibusiness]

Was that incident in Soller, Majorca because there was a rumour about the local customs impounding a boat there last summer because of lack of VAT documentation during the matriculation tax purge?

No this was on mainland Spain and about three years ago (if memory serves me).
It was a large (older) Trader.

To this day, the owner has been rather vague about the whole affair, but I wanted to check it's status (due to his vagueness) and in deciperhing all of the title docs, service records and other history I found the Spanish customs paperwork and records of the payment.

 

[MapisM]

Er, so?

LOL, precisely my thought when I read Tranona's reply to your previous post where you said he was wrong on 3 counts.
Otoh, he didn't actually object to that - which I guess is his way to confirm you were right. And as it happens, you were.

 

[Tranona]

LOL, precisely my thought when I read Tranona's reply to your previous post where you said he was wrong on 3 counts.
Otoh, he didn't actually object to that - which I guess is his way to confirm you were right. And as it happens, you were.

I am not disagreeing that there can be boats sold by people who have "reclaimed" VAT, just that if they are then sold outside the EU, say to someone in the Channel Islands, it is an offence to bring the boat back into the EU without paying VAT. If the boat is sold within the EU to a private person then the person who claimed back the VAT must charge VAT on that transaction. It is quite possible that one boat can have more than one VAT invoice related to it over time, simply because of the nature of the transaction. It is the transaaction that determines the VAT, not the asset. So, you can't have a boat legally where the VAT has been reclaimed unless you are the person that reclaimed it. So if it was subsequently sold without VAT being accounted for the offence would be on that transaction so the invoice for the original transaction is irrelevant. Remember the offence is not accounting for VAT properly, not a failure to provide an invoice.

 

[Tranona]

I think the main risk for UK boaters is the proximity of the Channel Islands. Your statement above isn't correct if they sell it to someone in the Channel Islands. That buyer doesn't have to be resident in the CI's, he just has to take delivery there, and can then sail it back to the UK, and he has an imported boat which is unlikely ever to be checked, so it's a tempting crime for some i'd have thought. When he sells it on, it seems the new buyer is at some risk, if customs subsequently investigate the previous buyers affairs and find something fishy.

What's a bit laughable, is that it's still possible for the seller to have an original VAT invoice in that scenario (if first buyer paid VAT then claimed it back), so actually getting a VAT invoice doesn't really protect you from the most likely risk you will face, that of an imported boat. I agree its not a big risk, but only because most people are honest.

But the offence will not be related to selling the boat outside the EU, but importing it into the EU, so I am correct. Everything else you say is right. The importer is committing an offence by not paying VAT, and there is always a risk that HMRC will pursue a subsequent owner for the unpaid VAT. However in all these threads nobody has come up with a case where this has actually happened.

 

[Tranona]

Based on the above, I think having proof of VAT paid documentation is worth having and you don't. End of

Never actually said it is not useful - just that its usefulness is grossly exagerated. Unless you want a marine mortgage it is unlikely that the document will have any practical use for the vast majority of people. And it is sad that the finance houses do not recognise this - but that is their choice.

 

[Tranona]

No this was on mainland Spain and about three years ago (if memory serves me).
It was a large (older) Trader.

To this day, the owner has been rather vague about the whole affair, but I wanted to check it's status (due to his vagueness) and in deciperhing all of the title docs, service records and other history I found the Spanish customs paperwork and records of the payment.

Obviously without the facts it is difficult to comment, but the "vagueness" suggests that there is something that triggered the Spanish customs interest. If the Bill of Sale showed that the sale took place between two private EU resident within the EU then they have no reason to question the lack of an invoice. If the sale took place in the UK then they would still have no reason to be interested as any VAT issues would be under UK HMRC jurisdiction.

So, I would suspect that either the boat was bought outside the EU or there was suspicion of some other VAT offence in Spain.

 

[Nautibusiness]

ABYA's take

I value the information that ABYA provide me with when trying to do my job professionally.
I am not a lawyer or tax whizz, just a broker, but I try to do the job with integrity and so listen to what my peers tell me.

The CEO of ABYA has sent me the following emails.
The first is her giving permission to use the second, but does have a snippet of info which some of you will take as obvious, some not believe and others simply not have thought about.

Before you tear it to shreds for a typo or minor wording error, please understand this is advice between colleagues then a public release of information.

Tom





First email:
Tom,

Do include anything you think would be helpful to other people.

Of course someone can choose to take the risk of buying a boat without the evidence, but that’s their risk. From the point of view of the seller, a similar boat with the evidence is potentially worth 17.5% more than one without it!

Kind regards,

Jane

Second email:
Tom,

Evidence of the VAT status of the vessel should be held by the owner of the boat. He may be asked for this by HMRC in the UK, or if they go to another EU state they are likely to be asked for the boat documents, which will include the evidence that VAT has been paid somewhere in the EU. The VAT evidence should also be passed on to subsequent owners for the same reason. The owner needs to find the evidence – try previous owners or brokers or the original builder or dealer. If the boat was registered elsewhere in the EU, the de-registration document also does the job as other EU states see the VAT evidence before registration can be completed.

In the UK, if HMRC look at the boat and the VAT document is not available, but the evidence that the boat was built before 1985 and wes in the EU on 1st January 1992 may be “deemed VAT paid”. However there is no document for this that HMRC can issue. This may not hold water in another EU state. If the boat is challenged in another EU state, the documentation shows it is a UK issue – you may be sent back to the UK, but if the local port authority is difficult they could charge the VAT and possibly also a fine. It is not easy to challenge such issues in a foreign language and in a foreign port.

There are occasions when the VAT status falls away – sale outside the EU, sale by a company when VAT should be paid by the purchaser. Customs Notice 8 available from HMRC gives more details of the VAT status of vessels. www.hmrc.gov.uk

I hope that helps.

Kind regards,

Jane

 

[Tranona]

With all due respect to the ABYA this is well off the mark.

There is no evidence that HMRC routinely or randomly ask owners for the VAT invoice. Ask the RYA for the results of their survey. The reason is very simple. There is no legal requirement for a buyer to keep a VAT invoice for any goods. What HMRC say is that if they suspect that a VAT offence has been committed then they will look for evidence such as the original VAT invoice to determine whether VAT has been properly accounted for. Private citizens cannot commit a VAT offence except where they have imported a boat from outside the EU and are therefore responsible for paying VAT.

With respect to being asked for a VAT invoice in other states, this is simply not true. EU law is quite clear - VAT is the responsibility of the state in which the transaction took place. So if a boat was bought in the UK then other states have no interest in it. The key document that determines which state is responsible is the Bill of Sale. The HMRC notice you quote makes this absolutely clear. Of course if customs in another EU state see an irregularity in the documentation of a boat they are entitled to investigate. Your earlier example of the Trader could have been bought outside the EU say in Gibraltar, the Canary Islands or Channel Islands (or indeed anywhere outside the EU). When it entered/re-entered the EU VAT would be due in the first EU state it entered. This would be the case even if it had an original VAT invoice to a UK/EU owner, but subsequently left the EU - it can then only re-enter without VAT if it is still owned by the person who took it out. All this is in the HMRC notice.

I note that Jane is suggesting another EU state could charge VAT and levy a fine on a UK boat - it would be useful to see her evidence of this, otherwise it has the status of an urban myth!

The biggest misunderstanding about VAT and boats (as illustrated by the ABYA advice) is that the "status" attaches to the asset. It does not. VAT is a tax on transactions, not assets. So what determines whether VAT is applicable and has been accounted for is the nature of the transaction. Again clear in the HMRC notice which explains all the situations where VAT may be applicable or not.

Hope this helps you understand the "real" issue. There is a lot of hot air air talked about VAT and the dire consequences of not being able to produce an "original" VAT invoice. Unfortunately, none of this is supported by fact or law. That is why some of us think that owners can be penalised by such suggestions that a boat is worth 17.5% less without a meaningless piece of paper. If that were really true perhaps such penalised owners would put pressure on HMRC to clarify what the law actually says, rather than publishing an interpretation which they admit is not necessarily the law.

 

[pheran]

Apologies if this has been asked before but why is a boat so 'special' with regard to VAT? What is the difference between a boat and my £90K Porsche? Am I expected to carry the original sales/VAT invoice along with my driving licence and insurance certificate?


Hypothetical of course, my £90K Porsche!

 

[MapisM]

What is the difference between a boat and my £90K Porsche?

If you have no clue about that, you'd better use neither.
That aside, cars are registered and it's much more difficult with them (not to mention hardly worth) not to pay the VAT.

 

[pheran]

If you have no clue about that, you'd better use neither.
That aside, cars are registered and it's much more difficult with them (not to mention hardly worth) not to pay the VAT.

Ah, I see. Thats why I get shouts of 'Mind yer wash' when I'm going past Reading on the M4.

I see the point about registration but surely the VAT on a £90K car is the same as that on a £90K boat? There must be some that have tried it. Could you not export the car 'sans VAT' and prior to registration then re-import it and quietly forget about the VAT status. Help me - could be looking for a business opportunity here

 

[saltwater_gypsy]

That's interesting becuase it has been asked on here many times whether anyone has reliable or first hand knowledge of French (or other) douanes actually asking for VAT invoices, and generally the answer is "no". Are you saying you have that first hand or highly reliable knowledge from a reliable source (as distinct from a 35th hand internet urban myth)?

First hand experience in Lezardrieux in June2000. I believe that strictly speaking, any boat from outside the EU is liable for taxation after 185 days.There have been numerous reports of Non EU boats being harrased and in some cases,impounded in Spain

 

[Tranona]

If you have no clue about that, you'd better use neither.
That aside, cars are registered and it's much more difficult with them (not to mention hardly worth) not to pay the VAT.

Could you explain that please?

It is very difficult to avoid VAT when buying a new boat. It has to either be a business asset so that the VAT paid to the supplier can be treated as an input tax, or it has to be exported. If it is a business asset, when the boat is then sold it is is a chargeable event if the boat is in the EU and VAT must be accounted for. If an exported boat is brought back into the EU the importer is responsible for paying VAT. It is the latter situation where the most opportunity lies for avoiding VAT because there are few checks. However the importer has committed a criminal offence and will suffer penalties if caught.

 

[Tranona]

First hand experience in Lezardrieux in June2000. I believe that strictly speaking, any boat from outside the EU is liable for taxation after 185 days.There have been numerous reports of Non EU boats being harrased and in some cases,impounded in Spain

Is your first hand experience of being "harrased" with a UK/EU owned boat?

It is quite right that non-EU boats should be stopped and checked for correct documentation. The rules are that a non EU boat can apply for temporary importation if the owner is a bona fide visitor. This is normally for 18 months, but can be extended, or more commonly renewed by leaving the EU and re-entering. There are restrictions on use and the boat cannot be sold in the EU. All the details of the rules are in HMRC VAT notice number 8. If temporary importation is not granted then VAT is payable at first point of entry into the EU.

There could be situations where French or Spanish customs might be interested in VAT on what is ostensibly a UK boat. For example a UK resident could buy a VAT paid boat in the UK, sail away into the sunset and sell the boat abroad to another UK resident. If the new owner brought it back into the EU VAT would be payable. If the original owner brought it back no VAT would be payable, although the rules allow this only "normally" within 3 years. So if there was something in the paperwork that suggested the boat had been outside the EU, even if UK registered and owned, they would be entitled to enquire about VAT. A key piece of paper would then be the original of the VAT invoice or the receipt from customs if the boat was imported privately. Once again all this is in the HMRC document or in plain language in the RYA information on VAT.

As VAT is a transaction tax, the starting point for determining whether VAT is payable is the nature of the transaction - the parties and location. So the Bill of Sale is a key document. If I bought a boat in Turkey from a UK resident and brought it into the EU I would be liable for VAT. If, however the owner had paid VAT before taking the boat to Turkey, he could bring it back into the EU by say, sailing to Greece, then sell the boat to me in Greece and no further VAT would be payable as a transaction between two EU residents is not a chargeable event.

 

[Nick_H]

EU law is quite clear - VAT is the responsibility of the state in which the transaction took place. So if a boat was bought in the UK then other states have no interest in it. The key document that determines which state is responsible is the Bill of Sale.

Sorry to keep this thread going, but I don't quite get that. The MCA Bill of Sale has no mention of where the transaction took place, so how can it be the key document that determines which state is responsible for VAT?

As an example, say a UK co. buys a British registered boat, reclaims the VAT, and then ships it out to the French Med to run a charter business. They then sell the boat to a British individual, and the parties complete an MCA Bill of Sale. As you said, VAT follows the goods, not the nationality of the buyer/seller, or where the boat is registered, so surely they have to account for French VAT on the sale? An MCA Bill of Sale doesn't prove to the Douanes that the boat wasn't purchased in France.