VAT Question - No original Bill of sale available

[Tranona]

There is no evidence that HMRC is demanding VAT from boat owners just because they do not have a receipt. In fact the only way HMRC can collect VAT directly from an individual is when goods are imported into the UK by the individual. Otherwise all VAT is accounted for by registered traders, which is where offences can be committed. They do, however pursue VAT fraud and will look at "schemes" such as cross border leasing which seek to reduce VAT, but the offence is committed by the trader, not the client..

You need to look into the history of how this particular group of people in HMRC came to be responsible for VAT to understand why they resent their loss - or rather curtailment of power over individuals and then to understand why they give advice in the way they do.

I suspect there is a change in attitude coming, because at a recent VAT seminar I went to the tax officers were at pains to point out that VAT (formerly Customs and Excise) were being integrated fully with Inland Revenue (Income tax, Corporation tax etc). In fact the seminar was lead by an IR person as part of her training!

We shall see!

 

[rogerthebodger]

Where is your boat registered and where is it normally kept. VAT is required to be paid irrespective of the age of the vessel if it is <span style="color:red"> </span> permanently imported" into a country with no "common VAT agreement"

If challenged if you can show you baot was in the UK for some time it may help but no guarantee.

EU has a free movement of goods agreement between members so VAT should not be an issue when moving between EU countries.

If I permanently moved my boat from South Africa I would have to pay VAT in the country of import. There may be other issued likd RCD and CE but that is separate issue.

Like I said it it up to the tax authorities to prove you have not paid the VAT not up to you that VAT has been paid.

 

[Tranona]

The key document to have is your Part 1 certificate (if you have registered it, not compulsory) or SSR (cheap and easy to do on line at the MCA). Although this is not evidence of ownership which is normally the Bill of Sale, most foreign authorities are happy with just the registration document because that shows them that any VAT or other tax issues are a UK "problem". Even if you do not have the receipts for the original build it would be useful to keep receipts of such things as mooring bills, insurance, photographs etc to show that you have owned the boat and kept it in the UK for a long time. Useful to have an ICC for yourself and of course your insurance. As you will have seen from many posts VAT evidence is not routinely asked for anyway.

Hope this helps

 

[Guest]

[ QUOTE ]
been charged VAT on a second hand boat.
*******
Well, you cant be, in the UK, at least.
VAT is payable on the original sale.. ie, its the sale that attracts VAT, not the boat.

[/ QUOTE ]
Not true in all cases - there is one very nasty 'gotcha' which occurs if a boat upon which VAT has been paid (or has deemed to have been paid by virtue of age) is sold to someone outside the European Economic Area (BTW - the boat's physical movements don't count) and is then effectively 'imported' back into the EU. VAT can (and is) applicable ... for a second time, on the same boat, albeit at a second-hand value decided by H.M. Customs.
This actually happened to a guy who bought an old British-built boat in America and brought it back home to Blighty. There was a helluva stink over it.
There's also a very grey area when the sale involves a citizen of a country which joined the European Economic Area after it's initial formation - dates then count - but I don't want to get drawn into that one.

 

[rogerthebodger]

[ QUOTE ]
sold to someone outside the European Economic Area (BTW - the boat's physical movements don't count) and is then effectively 'imported' back into the EU. VAT can (and is) applicable ... for a second time,

[/ QUOTE ]

I do not agree.

If I as a South African resident by a boat from a private person in the UK and do not "export" it outside the EU I do not have to pay VAT.

If I purchases a new boat in the UK from a VAT registered manufacturer and export it I pay no UK VAT, I pay VAT to the importing country but if I do not export I will pay VAT to the UK.

I do this all the time VAT is a usage tax and is paid in the country of use not related to the country of the owner.

If I permanently export the boat from the UK and then permanently re import it I will pay VAT again on the imported value a determined by HMCR

 

[rogerthebodger]

[ QUOTE ]
The key document to have is your Part 1 certificate (if you have registered it, not compulsory) or SSR (cheap and easy to do on line at the MCA). Although this is not evidence of ownership which is normally the Bill of Sale, most foreign authorities are happy with just the registration document because that shows them that any VAT or other tax issues are a UK "problem"

[/ QUOTE ]

Interesting I can register my boat that is located in South Africa in the UK but I will not pay UK VAT at it is not being permanently imported into the UK. As my boat is located in South Africa I will pay South African VAT.

The commander of my yacht in South Africa has don that and in fact flys the blue duster

 

[Tranona]

That situation is very clearly covered in the regulations.

 

[Tranona]

I am afraid you would have to pay VAT if you sold it to an EU resident. It is only transactions between private EU residents that are not subject to VAT. It is ownership and not location that determines whether it is in or out of the EU. i understand there have already been cases where the courts have confirmed this - one in France was posted on here, but without a citation. However, the post came from one of the parties involved so is probably correct.

 

[Tranona]

Interesting bit about the Blue Ensign. Condition 14 of the permit says "When cruising in foreign waters a yacht for which a permit to wear a special Ensign has been issued should take care to avoid any action which might result in complications with a Foreign power"

I sought an interpretation for this condition because my boat is, and always has been in Greece. The advice was that if I wanted my boat to be considered as a British registered ship (with all the benefits) then I should wear the Red Ensign because that what is required by the Merchant Shipping Act. Whether it makes any practical difference I have no idea!

 

[gjgm]

ok.. if its been imported/exported as regards EU, then yes, the situation maybe different.

 

[rogerthebodger]

[ QUOTE ]
It is ownership and not location that determines whether it is in or out of the EU.

[/ QUOTE ]

So if this is correct if my brother in lives in the UK buys a boat in South Africa and keeps it in South Africa he will have to pay UK VAT because he in an EU resident.

Last time I was in the UK I purchased some goods that I had exported directly back to South Africa. The company coserned did not charge me VAT at it was invoiced to my South African address and delivered directly to my freight agent at Heathrow airport cargo. I am a UK passport holder and was not asked for any proof that I did not reside in the UK.

I have imported and exported lots of time from my VAT registered company without charging VAT an exported goods and paid no VAT in the country of export including UK

I know the RSA VAT act very well and I also know RSA and UK tax acts are very simular. It makes no sense to me that VAT is charged based on ownership by and EU resident as that would mean I could buy any goods in the UK without paying VAT and leave the goods in the UK as I am not an EU resident.

Please point me to the relevant section of the UK VAT act that confirms this

 

[Tranona]

No, I think you misunderstand. If I as an EU resident sell a boat to you as a non-EU resident there is no VAT involved. Even if it physically stays in the EU. However, you should apply for temporary exemption to keep the boat in the EU as a non-resident. Registration will be irrelevant because now you can register as a British citizen on the SSR without being resident.

When you come to sell it to an EU resident VAT arises because it is no longer a private transaction between two EU residents. In effect its VAT "status" (how I hate that term!) is lost through the first transaction.

Status can also be lost if an EU resident leaves the EU with a boat, then sells it when it is outside the EU, even to an EU resident. That is quite clear in the regulations where it states that only the "exporting" resident can re-import without paying VAT again (assuming VAT was paid in the first place).

IIRC the case I referred to earlier was an EU resident who, for whatever reason, transferred ownership of his yacht to a Gibraltar company, including changing the registration. Kept it physically in France. Sold it to another EU citizen without any VAT. Authorities subsequently demanded VAT because it was treated as an import. Purchaser sued vendor because it was vendors responsibility. Court agreed.

If, on the other hand you bought a new boat from a UK builder or dealer you could avoid the VAT by exporting it - you can do this even as an EU resident if you follow the rules. I am not sure what would happen if as a non-resident you kept it in the EU. I would imagine no one would query it in the normal course of events. However, I am not sure, because I have never come across this situation, what would happen if you then sold it privately to an EU citizen. I guess in this case the receipt would be useful as it it would not say whether you were an EU resident or not. Interesting problem, but don't ask HMRC for advice!

No doubt there are rich pickings for lawyers in this area if the yacht is valuable and therefore potential bill is high. Conversely if it is just low life involved the authorities may not even bother!

 

[rogerthebodger]

[ QUOTE ]
If I as an EU resident sell a boat to you as a non-EU resident there is no VAT involved. Even if it physically stays in the EU. However, you should apply for <span style="color:red"> </span> temporary <span style="color:black"> </span> exemption to keep the boat in the EU as a non-resident

[/ QUOTE ]

This will only apply if the EU resident is not VAT registered and a private sale between two people and the residence status has no bearing on the transaction.

I would also not have to apply for any exception to keep it in the EU in this case.

If I purchased from a VAT registered vendor VAT would be charged unless I exported the boat from the EU. HMCR as most revenue authorities allow up to 3 -6 months to remove the goods after which VAT must be paid.

This 3-6 months also applies if I sail my RSA registered and RSA VAT paid boat into the EU. If I wished to keep it any longer even no sale had taken place VAT would need to be paid. If I sold it and the new owner intended to keep it in the EU VAT would be payable if the new owner removed it within the 3-6months no VAT would be payable. This is because the transaction in effect did not take place in the EU as the boat had not been imported at that point.

[ QUOTE ]
I am not sure what would happen if as a non-resident you kept it in the EU


[/ QUOTE ]

Answer I would have to pay UK VAT


[ QUOTE ]
When you come to sell it to an EU resident VAT arises

[/ QUOTE ]

Vat arises not by the fact of non resident selling to a resident but by the fact that it is technically an import even being the boat has not physically left the EU.

[ QUOTE ]
I am not sure, because I have never come across this situation, what would happen if you then sold it privately to an EU citizen. I guess in this case the receipt would be useful as it it would not say whether you were an EU resident or not. Interesting problem, but don't ask HMRC for advice!

[/ QUOTE ]

Now this is why IMHO the problem of VAT payed / not paid has come about and the attempt by HMCR to make the purchaser accountable for the VAT.

The situation as I see it is. If I purchase a boat from a UK boat builder for export (no VAT payable) but sell it to an EU resident to be kept in the EU before I remove it from the EU (in the 3 - 6 month period) and not pay the VAT I the non EU resident have committed tax fraud . The problem for the tax authorities is that I will have left the country with the money and either cannot be found or cannot be made to pay the money unless I can be returned to the EU. The easy option for the tax authorities is to go after the purchaser who they can get at so the speak.

I have a mate who purchased a boat from a boat builder for export but did not leave. Afer 18 months he was found and a court order was obtained detaining his boat pending payment of the VAT. I don't if he did pay the VAT or just took a midnight sail. I do know his boat is not in the country but he does visit from time to time


Import / export and Customs systems have been my busness for the last 20 years and have made a lot of money by knowing the procedures in various ways but will not go into that.

IMHO from the VAT point of view the original bill of sale in worthless as it does prove or otherwise that VAT has or has not been paid. IMHO for HMCR to take a court case against some one for non payment of VAT (tax fraud) HMCR must prove that VAT has not been paid by the responsible. It is not up to you to prove that VAT has been paid and that would be my stand. Detention of a boat needs a court order with all the correct court procedures being followed by HMCR. This IMHO would not happen as HMCR cannot proven non payment of VAT except in some special cases as I set out above.

 

[Tranona]

I think we are agreeing. The first case I was assuming that the transaction was private, not trade. The second (non-resident owning VAT paid goods in the EU), I guess there are many examples of this. My thoughts are about whether the VAT paid status as evidenced by the receipt of the original purchase would hold if the transaction was not between two residents.

All I think this illustrates is the muddle they are in trying to claim that the status is related to a boat when the tax is related to a transaction, and different transactions for the same article can treated differently depending on the parties and specific circumstances. All made more complicated by the lack of formality about title to boats.

On your last point about the strength of the proof, I bought my boat through a Greek company on a charter management deal. I had no title to the boat initially, only a contract for delivery at a later date and my interest registered on the Greek register. When it was "delivered" to me 6 years later, I paid VAT on the original contract value. The VAT receipt I have identifies the boat by its Greek registration number which no longer exists. The Bill of Sale identifies it by both the HIN and old registration number and the de-registration papers also has the registration number and name. So the receipt can only be tied to my boat if seen in conjunction with the other papers.

Finally, I think this also illustrates the dangers of government devolving the responsibility for accounting for tax, and more importantly maintaining records to third parties.

 

[rogerthebodger]

I agree HMCR at is a "muddle" and have no real ability to police their own rules so if thay find an easy way to make some one responsibility for a so called transgression of their rules they take it with out regard to the real culprit

With regard to your transaction with the Greek charter company.

The normal transaction flow is like this

Greek charter company buys boat from manufacturer and pays VAT either on invoice or Bill of entry if import.

Greek charter company being VAT registered claims VAT back as input tax.

Charters boat on which VAT charged and paid to Revenue in Greece every on happy.

Greek charter company sell boat to you not exported charge you VAT and pay to revenue. You not being VAT registered cannot claim VAT back.

If boat was exported outside EU no VAT on transaction in Greece but VAT will be paid to the revenue in the importing country.

As can be seen the Greek charter company has paid VAT on the invoice to it from the manufacturing company by claimed it back as input tax. So even if you had a copy of the original invoice from the manufacturer to the charter company if is still no proof of VAT being paid. on the boat as it was claimed back.

Now HMCR do not keep records of esch transaction and the only way to in effect determin if VAT has been paid at any time is to have a complete audit trail of the whole chain of transactions. On a 20 year old boat with several owners impossible. This is also not required by law as you only need to keep tax recorded in most countries for 5 years.

If I was ever put in a situation like this where some official demanded that I prove the VAT status, my answer would be "please show me the law that says I have too" and "If you are accusing me of tax fraud pls lay a charge and summons me to court"

I had a VAT audit some years ago where the VAT auditor said they had the right under the law to take any document back to there office to conduct the audit.

I asked then to show me where in the VAT act it says that. I am still waiting. I does say I must maintain records for 5 years so if I allowed any one to take my records out of my control I have by that clause broken the law. I also said that if any one including the VAT man takes any thing out of my office with out in permission I would lay a charge of theft.

Haven't had an audit since, yet !!!!

My view is know your rights and do not allow any government official to try to take your rights away and IMHO they will try if money or control is involved.

 

[Tranona]

No, nothing like that at all I am afraid. Charter boats do not pay VAT at all if they are on the charter register. When I bought mine(in 2001) it was normal for the local VAT office to provide a receipt "VAT paid" when it was taken off the register and sold privately. This was clearly not going to last and in 2002 the regulations in Greece were changed and VAT was charged.

The issue was agreement on the basis for establishing the value. Boats are sold under different deals and as I understand it those like mine where the contract price was 48% of the full value that would be the figure on which VAT was based If the original contract was for the full value (where the owner gets a cut to compensate for delayed delivery) the basis is 50% of the original price that is an estimate of its written down value. There was also an agreement on boats already in the system where the original contract was not in Euros (mine was in DMs) with the Euro value being set at the rate at which the currency entered the Euro (this bit cost me!).

After 6 months toing and froing with the dealer (one of the biggest in Greece) and the VAT authorities by proxy to establish this it all went smoothly except I lost out again when the £dropped from 1.47 to 1.33 in a couple of days.