VAT reality

[nemodreams]

Surely all that matters is you pay vat on the transaction of you now buying the boat from a current broker ?

Is the past history of vat an issue - if you have a current bill of sale on which vat was paid ?

 

[macd]

If the original supplier was not VAT registered because his turnover was below a certain level then he would not have charged VAT & VAT would not have actually been due.

A bit far-fetched that a supplier of yachts would have been below the threshold and not VAT-registered. (Not least because it would probably have been in his interests to be voluntarily registered.) But if he were, then he certainly could not have charged VAT to his customer, but he would equally not have been able to reclaim the VAT he was charged by his supplier(s). So, VAT paid.

 

[davidpbo]

If the original supplier was not VAT registered because his turnover was below a certain level then he would not have charged VAT & VAT would not have actually been due

Probably does not apply to you but some might use that argument

Unlikely given that compulsory registration is based on turnover. The original supplier would not have to sell many yachts to be over the threshold, it may even be only one.

 

[Otter]

A bit far-fetched that a supplier of yachts would have been below the threshold and not VAT-

Not as far fetched as the idea that owners of boats bought second hand need a VAT receipt as part of the ship's papers.

 

[Bitterend]

The situation experienced by other owners and myself is summarised thus:
My boat was on the hard in Ipswich and when I returned to the marina there was a brown envelope awaiting me from HMRC. Several such envelopes had been issued to owners. It was effectively a writ forbidding the boat to be moved until proof of VAT paid had been seen by HMRC. I had bought the boat as VAT paid but didn't get a certificate - OK, I should have insisted! I phoned HMRC and they said they would visit me at the marina. As my boat was built / registered in 1978, my Part 1 Certificate was accepted as proof of date of 1st registration. But the visiting HMRC officials wanted absolute, quantifiable proof the boat was in the EU on 31 Dec 1992. Fortunately, I had faxed copies of marina bills from Estepona marina which I had retained when I cleared out the boat on purchase.
I eventually received a letter from HMRC confirming they were satisfied the boat was VAT exempt and I included it in my boat Docs Pack.

My advice is don't be complacent, we sail to escape hassles, not to be the cause of them!!

 

[jwilson]

Surely all that matters is you pay vat on the transaction of you now buying the boat from a current broker ?

Is the past history of vat an issue - if you have a current bill of sale on which vat was paid ?

Not how it works for normal brokerage sales: these are not a VAT applicable transaction.

 

[Tranona]

The situation experienced by other owners and myself is summarised thus:
My boat was on the hard in Ipswich and when I returned to the marina there was a brown envelope awaiting me from HMRC. Several such envelopes had been issued to owners. It was effectively a writ forbidding the boat to be moved until proof of VAT paid had been seen by HMRC. I had bought the boat as VAT paid but didn't get a certificate - OK, I should have insisted! I phoned HMRC and they said they would visit me at the marina. As my boat was built / registered in 1978, my Part 1 Certificate was accepted as proof of date of 1st registration. But the visiting HMRC officials wanted absolute, quantifiable proof the boat was in the EU on 31 Dec 1992. Fortunately, I had faxed copies of marina bills from Estepona marina which I had retained when I cleared out the boat on purchase.
I eventually received a letter from HMRC confirming they were satisfied the boat was VAT exempt and I included it in my boat Docs Pack.

My advice is don't be complacent, we sail to escape hassles, not to be the cause of them!!

Thank you for the explanation. Suspect the fact that the boat had spent some time out of the UK would have been the reason why you were asked.

There seems to be little evidence that HMRC systematically ask for any proof. Not surprising as there is nothing in law that requires you to have proof. VAT offences can only be committed by VAT registered entities, or in the very specific case of imports by private individuals where the individual is responsible for paying VAT - and keeping the receipt.

While your case is interesting it is not representative, for two reasons. First of course it was "deemed VAT paid" under the transition arrangements and second it had been out of the UK and therefore potentially liable for VAT when returning. So, not unreasonable that they should ask for proof that it met the requirements to be deemed VAT paid.

The vast majority of boats in the UK are not in the same situation, having never been out of the UK so there is nothing for HMRC to be suspicious about. There is no mechanism for HMRC to charge VAT on a boat in the UK unless they can show that the boat has been illegally imported.

So, most people owning boats originally bought and kept in the UK have nothing to worry about.

 

[macd]

Surely all that matters is you pay vat on the transaction of you now buying the boat from a current broker ?

Is the past history of vat an issue - if you have a current bill of sale on which vat was paid ?

As jwilson wrote, in the normal run of events brokers don't sell things in the usual sense of the word. The act in much the same way as estate agents: in other words, the owner is the seller, the agent/broker the enabler. Brokers will usually be VAT registered, but the only VAT they'll charge will be on their commission, to the seller.

Thus, the only time VAT is usually charged on a boat is when it initially changes hands from first commercial seller to first end user. Subsequent bills of sale will have no reference to VAT, because none will be paid. Besides, if you read earlier in the thread, you'll see that the OP seems to have identified that original sale, but 'data protection' is being cited as the reason he can't get a copy of the papers.

 

[macd]

Thanks. The value is £30000. It is a moody 336. They provided a letter from princess yachts saying they have checked their records and can confirm that VAT was paid on the original invoice. I contacted princess for a copy of the invoice but they cannot provide it due to the data protection act.

I suspect Princess are being a little precious. 'Data protection' is often cited when companies/individuals don't actually know what they're at liberty to do so take an ultra-cautious approach. They should at least be able to provide a copy with the first purchaser's details blacked out*. I think that if the original records are on paper, data protection doesn't apply, anyway.

I'd take further advice.

* P.S. you might want to read this on "anonymisation" (yuch!): https://ico.org.uk/for-organisations/guide-to-data-protection/anonymisation/

 

[gjgm]

I'd take further advice.

I wouldn't.. I would buy the boat and get on with enjoying it and understand that no tax office is in the least bit interested.

 

[gjgm]

Bitterend- what date was this, out of interest?

 

[RichardS]

Thank you for the explanation. Suspect the fact that the boat had spent some time out of the UK would have been the reason why you were asked.

How would HMRC know that Bitterend's boat and the others with brown envelopes had ever been outside the UK? Do boats which go over the France for longer than a specified period have to clear-in when they return to the UK? I didn't think so but I've never sailed into or out of the UK.

Richard

 

[Tranona]

How would HMRC know that Bitterend's boat and the others with brown envelopes had ever been outside the UK? Do boats which go over the France for longer than a specified period have to clear-in when they return to the UK? I didn't think so but I've never sailed into or out of the UK.

Richard

In the ordinary course of events there is no way of checking. however, the point i was making is that boats being out of the UK can arouse suspicion, particularly if out of the EU. Who knows what triggered off HMRC's interest in this particular boat? The point is they do not conduct random inspections, let alone impound boats by posting a brown envelope on it unless they have some reason to believe an offence might have been committed.

While bitterend has provided some further explanation I suspect there is more behind it. Certainly should not be taken as an example to suggest that all boat owners might experience the same thing!

 

[jwilson]

In the ordinary course of events there is no way of checking. however, the point i was making is that boats being out of the UK can arouse suspicion, particularly if out of the EU. Who knows what triggered off HMRC's interest in this particular boat? The point is they do not conduct random inspections, let alone impound boats by posting a brown envelope on it unless they have some reason to believe an offence might have been committed.

While bitterend has provided some further explanation I suspect there is more behind it. Certainly should not be taken as an example to suggest that all boat owners might experience the same thing!

I am most surprised by Bitterend's description of several boats being effectively impounded, and amazed that no-one else has heard of this - it would certainly have given the sailing mags a lot of copy. The RYA have several times publicly asked owners who have had their VAT status questioned to report it to them, and the last time I spoke to their legal department I was told there were zero cases of an "innocent" boat being made to pay VAT again by HMRC, or anyone else. All the cases reported were apparently those where VAT was genuinely not paid, or where the VAT paid status had been lost, as it can be if boats change hands outside the EU.

 

[nauticalnomad]

Ive been asked twice for my VAT receipt on the boat and both times have said "How can i provide it when the boat was built in 1968 before VAT was invented".. They just agreed and said ok.. They did ask with authority but upon my answering both times they were happy with the answer. I guess they didnt know how to respond any further. In The Netherlands they seemed more concerned with measuring my knives in the cutlery draw and my passport for legality than the VAT and other paperwork i was trying to show them so proudly as i had them all arranged in a folder for them.

 

[Tranona]

I am most surprised by Bitterend's description of several boats being effectively impounded, and amazed that no-one else has heard of this - it would certainly have given the sailing mags a lot of copy. The RYA have several times publicly asked owners who have had their VAT status questioned to report it to them, and the last time I spoke to their legal department I was told there were zero cases of an "innocent" boat being made to pay VAT again by HMRC, or anyone else. All the cases reported were apparently those where VAT was genuinely not paid, or where the VAT paid status had been lost, as it can be if boats change hands outside the EU.

Could not agree more. There are, of course people who have difficulties with VAT - the examples you quote plus people who have reclaimed VAT on a business asset and then used the boat for private purposes. HMRC are wise to this and not only are they very reluctant to accept reclaim of VAT unless there is firm evidence that the boat is indeed part of a viable business, or otherwise qualifies, but will make life really difficult for the VAT entity. Having just listened to the account of a VAT audit (not directly related to boats, but in a business that has a mix of activities) would not want to risk that!

 

[macd]

I wouldn't.. I would buy the boat and get on with enjoying it and understand that no tax office is in the least bit interested.

Well, yes, I guess I didn't put that very well. I might more accurately have written, "If I wished to dot absolutely every "i" and cross every "t", that's what I'd do." The bloke's buying his first yacht, so it's not very surprising he wants to make dead sure.

 

[Daydream believer]

I wouldn't.. I would buy the boat and get on with enjoying it and understand that no tax office is in the least bit interested.

That is all well & good & I can understand the comment. However, the Op has demonstrated that buyers can be put off or made a little wary so when the Op decides to sell- which he will do one day- then if he comes up against a group of people like him, he will possibly have a job selling.
Buying is easier than selling
If brexit did come about ( I accept it is not a done deal & any EU reaction a long way off) the EU may have something to say about VAT on yachts from the UK

 

[BrianH]

If brexit did come about ( I accept it is not a done deal & any EU reaction a long way off) the EU may have something to say about VAT on yachts from the UK

Surely if the UK is no longer a member of the EU single market, any UK-registered yacht's VAT status is irrelevant to that market. It theoretically should be treated as any other non-member yacht whose country's internal tax affairs are not the business of the EU. As I've commented elsewhere, the problems arise for UK-registered yachts long-term based in EU countries - e.g. the Mediterranean - and presently treated equally as the domestic ones within the single market - that would be likely to change.

 

[GPS2]

Dare I say it, but as a comparison in the world of selling something, an older car for sale with full service history and complete paperwork will fetch a better price than one with less or none - fact.
Advice given to me by forumites and brokers (privately) when looking for a yacht of similar age as the OP was, no vat confirmation = Expected buying price less 20% to cover THE BUYERS possible future vat dispute or costs or at resale. Black & white, no quibble cheque book advice at the time, well received.