VAT Question!...

Garryt

Garryt

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There's been a recent article covering some of the complex issues regarding the vat charges on boats, both new and used.

Does anyone have any idea how the vat would be worked out on a used boat that cost say £400K in the US. If you lived on / used the boat for a year in the US, then imported it, what vat would you pay?
 
That's a good question and it's a similar situation to buying an ex VAT boat in the Channel Islands and importing it into the EU one year later. For sure, VAT would be immediately payable on entry into the EU from the US because even if it was a European boat that had had VAT already paid on it, it would have lost it's VAT status having been bought/sold outside the EU. There are HMRC rules for valuing goods and these are given in VAT Notice 252. You will see that there are 6 methods for valuing goods for VAT purposes, starting with method 1 applicable if you have a transaction price (which you don't 'coz it's a year later) and then going down thru a heirarchy of valuation methods which are basically comparisons with other goods or transactions. Worthwile talking to HMRC on this or a customs clearance agent
Don't forget that there might be import duty on top of VAT but I'm not sure about this one
 
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For sure, VAT would be immediately payable on entry into the EU from the US because even if it was a European boat that had had VAT already paid on it, it would have lost it's VAT status having been bought/sold outside the EU.

[/ QUOTE ]

Really? /forums/images/graemlins/confused.gif

Surely if I buy a VAT paid boat in the Channel Islands, complete with original VAT paid invoice, I'm not liable for paying VAT again when I sail it back to the UK?
 
Read THIS. I think it's pretty clear

Whether the CI have some dispensation with the UK HMRC or the EU on this, I don't know but, generally, if a VAT paid boat leaves the EU and is sold to a new owner who then reimports it back into the EU, VAT is due again
 
Well I've learned something there Mike, thank you.

That is absolutely amazing! So the HMRC are happy to charge VAT to an owner, and then charge a new owner VAT on a VAT paid boat if it changes hands outside of Europe! Astounding!

It also makes the whole "original VAT invoice to prove VAT paid status" even more of a farce, since if the boats changed hands outside or Europe it's still VAT liable!

What an absolute joke the whole thing is!
 
Its even more of a joke as if the owner of a boat in not resident in the EU he can keep his boat in the EU for 18 months with out oaying VAT.

All he has to do is take it out of the EU for one day and the 18 months starts again.

So register your boat in the name of a company registered out side the EU and no VAT will ever be payable.

I stand by to be shot down.
 
I think it was Deleted User who explained it in an earlier thread. To paraphrase my understaning: boats do not have a VAT paid "status". Boats (or any other goods) are not VATable. Only events or transactions attract VAT. So the transaction of buying a new boat from a dealer is a VATable event. Similarly, the importation of a boat from outside the EU is a VATable event. In the latter case there are exemptions which might apply to prevent VAT becoming payable (e.g. the same owner exported the boat from the EU and then re-imported it after less than 3 years). But just because VAT has been paid on a boat once does not mean a subsequent event might not also attract VAT.
 
That's a viable idea Roger. It is covered in the MBY article this month. It's not as simple as it sounds though: there are bik tax issues to manage, there will be £3k pa of legal fees in running the offshore company, and there might be legal challenge as to ownership of the boat if you don't execute the plan well, and so on. But it is a viable plan if you execute it well and if the benefits outweight the downsides
 
As it happens I can register a simple company in South Africa and I do not have to be resident in South Africa. I can then put in the the Tax man a nil trading return that any one can do it does not need to be an accountant but one would be better. I register my boat with SANSA on the SA shipping register (the main one off cost) and take it it to the UK. I am the sole owner of the company. The company owner the boat. I live in the UK.
The SA taxman may catch on after 5 years of nil returns but you just register another company and do it again. My first company I registered I was putting in nill returns for 15 years and not asked why I closed it down as it did not need it any more.

I then clearout of the UK for a foreign country say Norway every 18 months and return 2-3 days later.

I do not need to pay VAT in South Africa as the boat is not located in South African waters.

A mate did some thing similar by registering his boat in Belize but did not remove the boat from SA in required time so had to do a mid night sail up the African coast
 
You have to understand that it is not HMRC that charges an "owner" anything. It is the seller that is responsible for accounting for VAT. If the transaction is a sale from a VAT registered trader to a private citizen then it is a VAT able event. If it is from one private citizen to another it is not. A boat (or any other item such as a car) entering the EU is also a VATable event and the person responsible for the import is also responsible to HMRC for VAT (with some exceptions). As other have said, VAT is a tax on a transaction, not on an asset, and therefore "VAT paid status", although a convenient shorthand is not a correct description.
 
You could do that, but if you did, and if the facts were known by HMRC in the UK, you'd lose. your problem isn't the SA tax man, it's the UK tax man.

For your scheme to work, you'd need to travel from UK to SA for board meetings; you'd need to account for UK benefit in kind tax on your use of the boat; your dormant company status would then be disputable in the UK, and so on. As I said, the principle of using a non EU company works, but with tax the devil is in the detail and cutting corners is likely to cost you more in the long run than just doing it right to start with.

Also, we ought to be clear about the goal posts in these VAT discussions. Anyone can not pay VAT by breaking the law and stuff, and take their chances. What I and others on here have tried to discuss (and the MBY article is based on the same principle) is minimising VAT while fully complying with the law.

Also, you wouldn't have to go to Norway, which is one heck of a cruise every 18months (I'd rather pay the VAT!). The Channel Islands are a mere nice 100m cruise from UK S Coast :-)
 
Tranona, that's all correct except for one thing. A boat which is imported without the correct VAT being paid is (in UK law) smuggled, so a future innocent owner of it can suffer seizure of it by HMRC

I'm backtracking or at least correcting myself here in relation to previous posts on this. I said I'd research it after the last big thread on this, and I have, and I got it correct in the recent MBY article.

Just to be clear: if a boat is sold within the UK in a VATable transaction, and the correct VAT isn't paid, and a later (innocent) owner acquires the boat, then that innocent owner can never be pursued for the unpaid VAT nor can the boat be seized by HMRC. But if the boat is imported and the correct VAT is not accounted for at import, the boat is smuggled and then is technically liable to seizure by HMRC

That said, the likelihood of it happening is small. And if you were found owning a boat with no proof of VAT paid HMRC may not and will not assume it is smuggled till you prove otherwise. They would have to have strong evidence it is smuggled before contemplating seizing it.

But as I say, this is the one instance of Mr Innocent Subsequent Owner potentially having his boat seized, and as I say (and said earlier on here) I'm backtracking with apologies on that point from what I've said on here before, having since researched the point properly. The MBY article gets this point correct
 
Thanks for clarifying that point. Would be interesting to know if there have been any cases where HMRC has pursued subsequent owners. I would imagine there are quite a few "smuggled" ex USA boats in the UK, not necessarily avoiding tax, but avoiding getting a CE mark.

In a thread on YM a couple of months ago someone professionally involved in CE work was suggesting that Southampton docks was full of illegally imported boats and "something should be done". Of course he was not able, or was unwilling to produce any evidence so the thread died.
 
I have no data but I suspect there are virtually no cases where hmrc have pursued. I've never heard of any, and if there were any they would be known about. It would be an askable question under FOA, I expect. Also, HMRC's powers to pursue are substantially curtailed by judge-made law requiring them to have reasonable belief that the item is smuggled before seizing it (most of this law has developed on the cross channel booze and fags personal import battlefront)

I was using the term "smuggled" in its UK statutory meaning. Boats that are imported, with proper VAT paid, but not CE marked, are not smuggled.

I didn't see the scuttlebut thread but it's not right to mix up failure to do CE marking with VAT. No connection.
 
IMO it would be useful if some definative answers to at least some of the VAT questions could be put online clearly and concisely (if possible!).......excepting of course that not all situations could be easily covered.

Regarding VAT / CE free boats smuggled in to the UK - I would be surprised if not the case..........simply from human nature being what is when it comes to making money by exploiting gaps in the system / the trusting.
 
No, I know there is no direct connection. Just thinking that if somebody was bringing in a boat from the US they may be tempted to keep quiet about it completely. While VAT and duty is relatively easy to calculate, cost of getting a CE mark may be both unclear and potentially a lot of money and work.

The Scuttlebut thread was mostly about the virtues of compulsory registration as a means of ensuring that all requirements including VAT and CE were met. As you can imagine it did not get a lot of support.
 
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A boat which is imported without the correct VAT being paid is (in UK law) smuggled, so a future innocent owner of it can suffer seizure of it by HMRC

[/ QUOTE ]So, in other words, it's our old Mr.B who would suffer a "grotesquely unfair" loss at the end...? /forums/images/graemlins/wink.gif
Mind, I'm fully with you on the principle, though: in an ideal world, he shouldn't!
 
Yes, as I said I'm backtracking and have apologised twice already on here. I'll have some humble pie, though I'll cook it myself, if you get my drift :-). I have at least researched the point, found the obscure law (and can give statutory references etc if anyone is interested). I stated it all correctly in the MBY article

Your word "would" is strong. "Could, maybe" is closer to the mark. There are many big hurdles for HMRC to get over to confiscate the boat. And for sure Mr B's mere non possession of VAT-paid documents is categorically not a reason for HMRC to sieze the boat. They need good evidence that it was actually smuggled, not a mere absence of evidence it wasn't

This smuggling scenario is the only instance in which Mr B suffers. If someone previously failed to pay VAT in a non-import transaction, HMRC can never take the boat from Mr B. Likewise, the non possession of VAT-paid proof is not itself, per se, a ground for confiscating the boat. But yes, as you say, smuggled boats can in principle be taken by HMRC

I'm talking UK law here but it is likely similar elsewhere because many countries copy UK law
 
The trouble with CE Marking is that there is nobody to police it and that goes for other industries as well as boats. In my own industry (construction equipment) huge numbers of non-CE marked machines were imported into the UK during the boom years. Obviously a cheaper price and a quicker delivery attracted many customers who were not too bothered about respecting the law. The only risk would be that if the machine were involved in an accident, H & SE would attempt to prosecute the owner for using a machine without CE marking and the risk of that was relatively small.
With a boat, the only risk of operating a non CE marked boat is prosecution by the MCA in the event of an accident and I've never heard of that happening so the temptation to buy a cheaper non CE marked boat is large. In practice though, there doesn't seem to be a huge problem with boats being involved in accidents due to being non CE compliant so compulsory registration just to ensure CE marking would be total overkill IMHO
 
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