Vat question (Not again!) Vat when selling boat

[seanfoster]

I know there have been numerous posts regading VAT but I can't find one relating to my question.
Bit of a hypothetical situation, but exploring a few options.

If I bought a boat in a non EU country (and ignoring all the aspects of RCD and CE Marking for the moment) As I understand it, I would have to pay VAT in the first country I visited within the EU on the purchase price? (Correct me if my understanding is not right).

If I then sold it a few years later in a non EU country, could I then reclaim that VAT back?

An example I was thinking of was - Buying a yacht say somewhere like the BVI's for example, crusining around that area for a few years then returning to the UK and keeping it here for a year or two. Then after getting tired of the cold weather sailing back to the BVI's and selling/upgrading there.

Any help would be appreciated.

 

[MoodySabre]

You will have to pay the VAT if you are keeping the boat in the EU. If just visiting then you need to ask the VAT unit that deals with boats how long you get. Not long I guess.

You can't claim back the VAT as you are not registered for VAT. If you buy or sell a used boat in the EU then provided the VAT was paid when new or first imported there is no "recognisable" VAT (my words) in any subsequent transaction.

 

[MoodySabre]

RYA advice here

 

[Tranona]

The RYA information should answer most questions on VAT. In your example, yes you would have to pay VAT if you are an EU resident and no it is not reclaimable. You can avoid VAT (and CE) if you are non-EU resident by claiming temporary importation which is normally for 18 months. If you are non-resident and becoming resident you may be able to bring in without VAT but the rules are strict and you would need to obtain advice from HMRC.

If you are EU resident none of this applies to you.

 

[s/v moondancer]

Worth reading

http://customs.hmrc.gov.uk/channels...ntent&id=HMCE_CL_000289&propertyType=document

 

[mjcp]

On a slight tangent...

If I AM VAT registered, eg if I setup a company to run my boat as a charter boat.

I buy a boat and pay VAT as normal then reclaim it as an input.
I then sub charter to my chosen charter agent, paying VAT on the "sale" ie an output, each time they use it and claim rebates on other costs (inputs) that I pay.

If I then close the business, do I need to charge VAT on the sale of the assets remaining, ie the boat?

Also, to do the above with no intension of actively chartering is a form of avoidance and so wrong, but how long would one need to try chartering before saying "Its not working" and closing down?

mjcp

 

[PeterGibbs]

VAT recovery is only possible within the workings of a VAT registered business which presumably does not apply to you. Once a consumer has paid, that's it. No refundo!

But, on bringing the boat into the EU as a EU citizen, if it is your intent within a specified time is to take it back out again, you can negotiate a relief for the period of your stay, providing that does not extend to years. If you can show the owner of the boat is not an EU citizen it's actually easier to use this route! So it's off to the VAT office to see what you can negotiate before you undertake this epic voyage!

PWG

 

[PeterGibbs]

Although I am not a tax expert, I think you will find the following applies:

As a VAT registered company (partnership or Ltd company) you enter a claim to recover VAT on a boat purchase. In my experience you have to show your company is seriously setting up - you would be visited by an inspector in the process of establishing your claim for VAT registered status, and again for this quite large net VAT recovery. It would not be an automatic "cheque in the post". Your claim might fail at this point.

Assuming you succeed, and after a dilatory period of "trading" you decide to dispose of the boat in the course of liquidating the business. This asset would then pass to someone, say, yourself as director? As a VAT registered company, disposal of the asset would attract VAT on the then valuation of the boat, which presumably you would have to pay yourself to satisfy the VATable transaction. Result? perhaps you have gained a (? small) VAT saving between VAT reclaimed on a new boat and a written down value on disposal. Worth it?

If the inspector decides your boat purchase was not genuinely in the course of running a business, the original VAT claim might be disallowed and a recovery claim entered against the directors (? you) Be sure the VAT office has seen this one before, on cars and many other "essentials" that directors insist they need!

PWG

 

[Tranona]

VAT recovery is only possible within the workings of a VAT registered business which presumably does not apply to you. Once a consumer has paid, that's it. No refundo!

But, on bringing the boat into the EU as a EU citizen, if it is your intent within a specified time is to take it back out again, you can negotiate a relief for the period of your stay, providing that does not extend to years. If you can show the owner of the boat is not an EU citizen it's actually easier to use this route! So it's off to the VAT office to see what you can negotiate before you undertake this epic voyage!

PWG

This is not correct except in certain very narrow circumstances for EU residents (established in EU, citizenship is not the test). It is as you say straightforward for a non EU resident owner, but usage is effectively constrained to his or her own private use when in the EU. This is not unreasonable. Why should anybody in the EU be exempt from paying this tax? If there were practical loopholes, everybody could do it! So there are none.

See the link provided by s/v moondancer above for the details

 

[westernman]

I know there have been numerous posts regading VAT but I can't find one relating to my question.
Bit of a hypothetical situation, but exploring a few options.

If I bought a boat in a non EU country (and ignoring all the aspects of RCD and CE Marking for the moment) As I understand it, I would have to pay VAT in the first country I visited within the EU on the purchase price? (Correct me if my understanding is not right).

If I then sold it a few years later in a non EU country, could I then reclaim that VAT back?

An example I was thinking of was - Buying a yacht say somewhere like the BVI's for example, crusining around that area for a few years then returning to the UK and keeping it here for a year or two. Then after getting tired of the cold weather sailing back to the BVI's and selling/upgrading there.

Any help would be appreciated.

if you are non resident in the EU, and are resident elsewhere (obviously), if you then move to the EU to take up permanent residence you can bring with you all your possesions (which you owned before the move) with you without paying any VAT or any other import tax.

You cannot dispose of those possessions within a certain period of time without attracting various taxes.

In one particular case I know in detail, a colleague of mine who was permanently resident in California moved to France to become resident. He imported his Corvette (that's a car ;-) with him. This attracted no VAT.

He was able to sell it only after six months of residence and after getting it registered in France (hassle with colours of brake lights etc). Again no VAT involved.

I would imagine what applies to cars, will also apply to a boat. Althougth the period before you can sell it without incurring taxes might be longer.

 

[PeterGibbs]

This is not correct except in certain very narrow circumstances for EU residents (established in EU, citizenship is not the test). It is as you say straightforward for a non EU resident owner, but usage is effectively constrained to his or her own private use when in the EU. This is not unreasonable. Why should anybody in the EU be exempt from paying this tax? If there were practical loopholes, everybody could do it! So there are none.

See the link provided by s/v moondancer above for the details

I understand where you are coming from but see Michael Chapman's note below for the practical way to deal with it.

PWG

 

[Tranona]

I understand where you are coming from but see Michael Chapman's note below for the practical way to deal with it.

PWG

Yes, that is exactly what the VAT guidance says. However it only applies to Non-EU residents. You were saying that EU "citizens" could have temporary importation in the same way. This is not so (and as I said the term is "established" in the EU - which means residency, not citizenship).

So there is no "practical" way to deal with it. If you are EU resident you have to pay VAT on entering the EU with a non EU boat.

Otherwise the Channel Islands (for example) would become one big marina where boats owned by EU residents were kept VAT free and "visit" UK and France!

 

[Bobobolinsky]

Hi try a US Maryland inc ownership and rent the boat from the wholly owned Maryland corporation. Any income earned out of state is sales tax free. You then get relief from Vat for 18 months.

Robin

 

[Tranona]

Hi try a US Maryland inc ownership and rent the boat from the wholly owned Maryland corporation. Any income earned out of state is sales tax free. You then get relief from Vat for 18 months.

Robin

No you don't. Only a non EU resident can apply for temporary importation and avoid VAT. Usage is then limited to the owner and his/her family.

Once again if this was possible and legal everybody would be doing it!

 

[Bobobolinsky]

It's the ownership that counts not who hires it. An incorporation is a third party, another legal entity, read virtual person. Tax avoidance is legal.

Robin

 

[Tranona]

It's the ownership that counts not who hires it. An incorporation is a third party, another legal entity, read virtual person. Tax avoidance is legal.

Robin

Hi Robin

You could not be more wrong in the case of VAT. If an EU resident brings a boat from outside the EU into the EU he is liable to pay duty and VAT. End of story.

Relief is available if the person is establishing or re-establishing residence, but then by definition he is not an EU resident at that point.

A non resident may apply for temporary importation which allows restricted use in the EU normally for a period of 18 months. The main restriction is that the boat can only normally be used by the individual and family while it is in the EU.

It is all in the HMRC guidance referred to above, or in a simplified (but correct) form on the RYA site.

As I said if there were legal schemes for private individuals to avoid VAT everybody would use them - but there aren't so they don't.

 

[Bobobolinsky]

Maybe didn't make it clear, the EU resident is not the owner, he is the hirer, the incorporation is bringing it into the country. The rules specifically allow an EU resident to rent a boat. The non EU corporation has though only 18months.

Robin

 

[Tranona]

Maybe didn't make it clear, the EU resident is not the owner, he is the hirer, the incorporation is bringing it into the country. The rules specifically allow an EU resident to rent a boat. The non EU corporation has though only 18months.

Robin

If you are referring to 5.2 and 5.3 of the HMRC guidance notes you will see that usage is highly restrictive and of little practical use. Again for obvious reasons. Suggest you read the notes and form your own view of what is permitted.

 

[goboatingnow]

It's the ownership that counts not who hires it. An incorporation is a third party, another legal entity, read virtual person. Tax avoidance is legal.

Temporary importation is available to corporate enties established outside of the EU. However andits a big However, Customs can use the concept of beneficial owner. If it is obvious that you are both the owner of the company and the hirer of the yacht, Customs could demand, proof of hire charges, such hire charges would have to withstand the " at arms length test". Also if these hire charges existed and were being transacted in an EU country there is a raft of VAT law and pratice that come into play. ( also you would require in most countries to have the vessel flagged in that countries registration and hence pay all associated business charges. Beleive you me you'd pay well above the equivalent VAT rate.

It is possible but on normal boats that were talkng about here it just isnt practical or financially viable.