VAT Question

[rhinorhino]

If I buy a yacht in the EU (VAT paid) for use in a UK based charter buisiness can I re-claim the VAT?
I know I can import a yacht VAT free, but can I re-claim the VAT?
Thanks


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[ChrisE]

Don't know for sure but on the grounds that you can't, as a business, claim VAT back on a company car, my guess is the same logic holds for a boat.

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[tcm]

Um, altho not wishing to spoil chris enstone's post - the case of reclaimng vat on company cars is a "special case" - you reclaim everything EXCEPT vat on a car.

As far as in know, you should deal with one vat system. So no - you can't reclaim vat from the UK customs and excise any VAT that was paid to finance ministry in france.

The same applies in the uk - once a boat is vat paid, then if a company buys the thing,secondhand, they can't extract and claim a vat element out of it. The vat has to be always held as a separate item, and the item not "consumed" as if by a final end user.

Essentially, i think you should order the boat freom the overseas eu country and quote your vat and registration number, so that they don't cvharge vat at their end, annd you are charged the vat here - and THEN you can reclaim. Or, as chris says, if it's a car, you can't. Genrally, to relaim the vat, they want to see a charter agreement and it takes a few months.

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[snowleopard]

and a little sting in the tail. if you reclaim the VAT now, i believe you will have to charge VAT when you sell it on, and pay that to HMC&E so the net gain is only the tax on the depreciation!

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[[2574]]

You can only claim the VAT back if you have a VAT invoice in respect of your purchase contract. If the boat is VAT paid and you are buying a used boat from a VAT non-registered vendor then you will not have a VAT invoice in respect of your purchase contract and cannot therefore reclaim the VAT. If you are buying a new boat from abroard then I imagine that the supply will be zero rated (exported from manufacturer) but you will have to pay UK VAT on import - but then you will be able to reclaim the VAT paid via your UK charter business.

I've applied principles of general VAT law to this answer - I'm not a marine/boat VAT specialist!

Rob

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[Sybarite]

My understanding is the following - but my knowledge is very rusty:

If you buy tax paid from an individual then there is no reclaimable VAT - it-s considered to be fused in the total value of the boat.

If you buy from a VAT registered business; if you have a VAT number too and receive an invoice from your foreign seller showing clearly that the boat is being sold on a net of tax basis, then you pay VAT on the import and it becomes immediately deductible to the extent that the asset is wholly, exclusively and necessarily used in the business. If not then you pro-rate the VAT on a businessersonal use basis and have the back-up to prove this (eg log-book) on inspection.

I would be grateful if there are more knowledgable people out there who could confirm this for me.

John

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[ChrisE]

Well, take me to the foot of my stairs! You learn summat every day.

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[Observer]

In order to recover VAT paid, a VAT reigstered person must have proof of tax paid in the form of a VAT invoice issued by the seller (which must be addressed to purchaser). So once VAT has been paid by a non-registered person, it cannot be recovered by a subsequent owner who is registered.

If a registered person buys goods from a non-registered person which have previously had VAT paid on the original purchase (e.g. supplier takes trade-in from non-registered person against a new vessel), he can sell on under the 'margin scheme' which means he only has to account for output tax on his profit (if any). If a registered person buys used goods from another registered person who is selling under the margin scheme, he must ensure the sales invoice issued by the seller includes the statement "Input tax deduction has not been and will bot be claimed by us in respect of the goods sold on this invoice". The purchaser may then also use the margin scheme if he sells on so won't have to account for output tax on the sale price (or only on any profit element).

The statement above often appears on an 'invoice' which a dealer taking a trade-in will require from the seller even if the seller is a private (non-registered) person not selling in the course of a business (you might also find it when you trade in your car). It is not strictly necessary if the seller is non-registered but a precaution often taken to ensure the dealer can sell on under the margin scheme even if the seller is a registered person selling in the course of a business and mis-represented his status.

As snowleopard said, if a registered person recovers input tax he will eventually have to pay output tax on the sale so the actual tax saved is on the depreciation element (there is a cashflow benefit as well, of course).



<hr width=100% size=1><A target="_blank" HREF=http://aflcharters.co.uk>Dream Dancer</A>

 

[tcm]

True.

However, the eu govts are not at all joined up in this regard when it comes to selling. In france and italy for example, the vat is either paid or not paid - not reclaimed. in france frexample, you get an orange book which ipso facto means youv'e paid the TVA. I suppose this means that Uk boats might be vat-reclaimed, but can show an invoice which incudes vat. To other eu authorities, this may be a clear indication that the boat is vat-paid.

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[steve_cronin]

Ther specific case of motor cars being excluded from "plant & equipment" input tax being re-claimable was introduced by the then chancellor to stop abuses by people in business in effect, getting a (then) 20% discount on their cars. However, firms like driving schools and taxis whose vehicles were specially adapted BEFORE supply could still re-claim the tax. However tax is payable on the dis[posal of these vehicles.

As to VAT on charter boats, as far as I'm aware, this is recoverable. Problem will be that different countries in this EU rubbish charge different rates so you would need to re-claim it from the country to which it was paid.

Steve Cronin


<hr width=100% size=1>The above is, like any other post here, only a personal opinion

 

[jfm]

Snowleaopard and Observer, that's not really true, once you overlay the effects of the market. With larger boats, VAT paid status is a bit of a white elephant. A future purchaser wont pay you 17.5% more just cos the boat is already VAT paid, becuase he/she wants to buy an ex VAT boat so can save the vAT themsleves. So, if you organise the purchase of a larger boat without VAT, you do in fact end up saving nearly all the VAT, not just VAT on the depreciation, and it's an absolute gain, not merely a cahsflow benefit (Observer, gimme a call sometime)

VAT on boats in France, Spain, Italy is quite differnt from here. You can just buy the boat VAT free, you dont have ot pay it and reclaim it. Likewise you can then sell it on without charging VAT to the buyer.

In anwer to original question, I agree with everyone, he cannot reclaim the VAT on this seconhand boat. So he should find an ex VAT boat instead, if possible

 

[Observer]

You may have in mind more complex schemes but, in simple terms, the following is surely correct.

If a business buys a boat (in UK) for £1,175,000 incl VAT it recovers £175,000 tax so has net cost of £1,000,000. If it sells at VAT paid market value after 5 years of (say) £587,500, it pays £87,500 output tax so has net receipt of £500,000 and net cost of £500,000.

In contrast, a private buyer would pay £1,175,000 and sell for £587,500 so net cost is £587,500. The business 'saves' £87,500.

The only way for the VAT recovered to be an absolute gain is if the VAT registered seller can sell at market value without accounting for output tax. That could be done by (for example) exporting the boat outside the EU before sale. But value in non-EU market may be different and if subsequently re-imported to EU, the boat will be once again subject to importation VAT.

N'est pas? (I'll call shortly.)

<hr width=100% size=1><A target="_blank" HREF=http://aflcharters.co.uk>Dream Dancer</A>

 

[Innes_Ker]

Note also that the chartering of the yacht must be run as a "business" and not as an "investment". Your local friendly VATman may be able to explain the difference to you.

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[jhr]

<<Your local friendly VATman may be able to explain the difference to you>>

...and may also be very interested in why you're asking the question?

<hr width=100% size=1>Je suis Marxiste - tendance Groucho