VAT reality

[DJE]

Fair enough; knock off 20% and I will strike out the "Free of all incumberances" clause from the bill of sale.

 

[jwilson]

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.

Everyone is of course at liberty to try offers of an extra 20% off the asking price of older boats with "no VAT proof". The owner may occasionally accept this, but probably more because he might badly need the money rather than anything to do with VAT. If however you go this route expect to be rejected quite often, and you may be turning down a boat that is otherwise just right for you.

Still waiting for more from Bitterend - a really odd story. That one boat might get this treatment is possible - perhaps somone told HMRC that they knew the boat was not VAT paid and thus illegally imported. For them to put similar notices on a string of other boats is very very strange.

HMRC can only claim VAT if they can PROVE it was not paid. In 99.9% and possibly 99.99% of the "no VAT proof" boats out there, and there are many thousands, HMRC cannot check and certainly not prove whether VAT was paid. They don't get "£xxxx for yacht A, £yyyy for yacht B and £zzz for yacht C" from the boatbuilder, just a total lump sum for each quarter. Only if they had mounted a VAT investigation at the time, and the records had still been kept (frankly unlikely) would they actually have records relating to individual yachts. This is why is is pointless writing to them asking for confirmation that VAT has been paid on your boat.

 

[Rivers & creeks]

Was it an Oyster by any chance? Many Oysters in the brokerage in Ipswich have signs on them saying they can't be moved until VAT is paid because so many are bought ex VAT.

 

[BrianH]

Pertinent for the cruising yacht owner would be other EU countrys' tax authorities interest in visiting EU-registered yachts. Another poster has already mentioned the aggressive Guardia di Finanza in Italy, which as I berth there I can attest to, although never personally approached as they seem to only focus on their compatriots where I am.

But I have been warned about Croatia, where I regularly visit, that if a demand of VAT-paid proof is not satisfied they can claim it for their own country's treasury, not the visiting vessel's flagged state, which can possibly stimulate their interest in doing so. It is for this reason they have been insisting on all visiting yachts are equipped with the T2L document as "proof of community status", which they appear to regard as proof that VAT has been paid. Despite HMRC's insistence of its irrelevance they recognise the problem and have been issuing a T2L to anyone who requests it. Could such a document cover any missing VAT receipts for future potential buyers?

 

[Tranona]

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.

Absolute nonsense. There is no way HMRC can charge anybody VAT on an old boat, unless there is evidence of VAT chargeable event having taken place that was not accounted for. While this can certainly happen if a boat has been privately imported, or if a VAT registered entity has improperly accounted for VAT, it cannot happen on a private boat where there is no evidence it has been imported.

Just one of those urban myths that surround VAT and it has no foundation in law or in fact.

 

[jwilson]

Absolute nonsense. There is no way HMRC can charge anybody VAT on an old boat, unless there is evidence of VAT chargeable event having taken place that was not accounted for. While this can certainly happen if a boat has been privately imported, or if a VAT registered entity has improperly accounted for VAT, it cannot happen on a private boat where there is no evidence it has been imported.

Just one of those urban myths that surround VAT and it has no foundation in law or in fact.

Correct: I have actually known someone who TRIED to pay VAT on an older "no VAT proof" boat just ".... to be absolutely sure he was legal" and HMRC would not take his money. As Tranona says they need evidence of a VAT chargeable event before they can charge VAT.

Out of interest, do all those who worry about yacht VAT carry evidence of their car's VAT status when they drive around?

I accept there may be a few places such as Croatia where local officials may more or less make up their own rules, but for all typical cruising in older low to mid value boats there just is no problem.

 

[Tranona]

Could such a document cover any missing VAT receipts for future potential buyers?

No. For the very reasons you state. It is not proof of VAT having been paid, only that the goods are free to move in the EU and is related to transport of goods through trade, not private goods - you don't need one for your car.

For UK transactions the only "proof" is the original VAT invoice (or in the case of boats privately imported into the UK, the HMRC receipt - which they don't keep a copy of!). The whole UK VAT system depends solely on commercial invoices issued by the seller, who is also solely responsible for accounting for the tax.

Appreciate that is is different in other states which have more robust systems (particularly related to boats), but that is how it is. Also worth remembering that this "proof" bit is a post 1992 phenomenon so there are 19 years worth of VAT paid boats where there was no requirement for proof. In reality, the proof bit is only to comply with the directive regarding movement of boats in the EU, none of which seems actually to have been translated into law.

Therefore if states are going to try and impose VAT on a boat that does not have proof, it must rely on using its powers under VAT law - so must prove a "chargeable event". Hence if you can show the transaction for the boat occurred in another state, they can do nothing about it, VAT being the responsibility of the state where the transaction took place.

This may not, of course prevent officials from making life difficult for visitors, because in the absence of clear cut law there is always a vacuum. The ease with which most boats do move around the EU without any problems suggests this "non-system" works well.

 

[BrianH]

No. For the very reasons you state. It is not proof of VAT having been paid, only that the goods are free to move in the EU and is related to transport of goods through trade, not private goods - you don't need one for your car.

I needed the tongue-in-cheek emoticon when I too briefly and rather clumsily wrote that. After all, if some EU states take it seriously as VAT-paid proof then it might, just might, calm some future nervous, potential buyer to see an official, HMRC document naming the vessel.

 

[GeorgeLlewellin]

The responsibility for VAT lies with the state where the transaction (chargeable event) took place.

So my old boat was UK registered, but the VAT was paid in Greece where I bought it. HMRC would not be in the least bit interested in any VAT issues on the boat.

They could be, depending on various details like age as already detailed above.

When I was a yacht broker I sold a boat lying in Ireland to a UK resident who imported it through Plymouth, we had proof of VAT being paid in Ireland but UK Customs & Excise were not happy it was enough. The boat was arrested and remained arrested for more than a month until the difference was paid.

I also sold a french owned boat at Grangemouth that had been arrested by Customs and Excise because of a VAT infringement. I sold the boat to Ireland, after C&E agreed it could be released from arrest and launched after the signing of a Bill of Sale, providing it was exported within a reasonable period of time.

Both of these incidents were some years ago.

Customs & Excise do not frequently get involved in arrests of vessels because of VAT infringements, but they do when they deem it necessary. Caveat Emptor.

George

 

[BrianH]

Hence if you can show the transaction for the boat occurred in another state, they can do nothing about it, VAT being the responsibility of the state where the transaction took place.

Having the utmost respect for your knowledge on the subject I must therefore judge that I was misinformed when told that when visiting Croatia, "if a demand of VAT-paid proof is not satisfied they can claim it for their own country's treasury".

However, that being so, if responsibility lies elsewhere, I wonder why they bother to be so difficult about VAT-paid proof of visiting yachts and why other UK-registered forumites have had requests from French, Dutch and Belgian authorities for proof of VAT-paid status when cruising in those countries.

 

[lpdsn]

When I was a yacht broker I sold a boat lying in Ireland to a UK resident who imported it through Plymouth, we had proof of VAT being paid in Ireland but UK Customs & Excise were not happy it was enough.

I've heard similar stories about UK boats imported into Ireland and being charged the difference between the UK and RoI VAT rates. Even heard a first hand account of a VAT inspector wandering around marinas disguised as a yotty and leading owners who'd bought a yacht abroad to entrap themselves.

Key fact though; this was all pre-1992.

 

[jwilson]

I've heard similar stories about UK boats imported into Ireland and being charged the difference between the UK and RoI VAT rates. Even heard a first hand account of a VAT inspector wandering around marinas disguised as a yotty and leading owners who'd bought a yacht abroad to entrap themselves.

Key fact though; this was all pre-1992.

They cannot charge the "difference" between VAT rates: once VAT is paid at the correct % rate in one EU country it is paid fully in all unless something happens to completely lose its VAT paid status. Even if another country has a higher % rate. What might possibly happen is that a boat was deliberately seriously undervalued for VAT purposes when it was paid, and that gets caught out as a fraudulent transaction.

 

[Tranona]

Both of these incidents were some years ago.

Customs & Excise do not frequently get involved in arrests of vessels because of VAT infringements, but they do when they deem it necessary. Caveat Emptor.

George

As with Bitterends account earlier, it is a mistake to take a specific case and then generalise from it. VAT rules are so complex and change over time so what might have happened "many years ago" with vessels with less than straightforward backgrounds has no relevance to today's problems. This thread was started about a 1989 boat with a continuous history of always being in the UK where the original invoice has been lost - probably because when the boat was new it was of no consequence. Remember the current regime that requires proof of VAT for a private boat to move freely in the EU only came in in 1992, and actually has no relevance to a boat that always stays in the UK, is owned by private citizens and changes hands between private citizens.

This does not mean that VAT offences cannot be committed in relation to boats, just that these can only be committed by VAT registered entities or in relation to boats that have spent time outside the EU. If they suspect such infringements HMRC can of course take action.

 

[Tranona]

Having the utmost respect for your knowledge on the subject I must therefore judge that I was misinformed when told that when visiting Croatia, "if a demand of VAT-paid proof is not satisfied they can claim it for their own country's treasury".

However, that being so, if responsibility lies elsewhere, I wonder why they bother to be so difficult about VAT-paid proof of visiting yachts and why other UK-registered forumites have had requests from French, Dutch and Belgian authorities for proof of VAT-paid status when cruising in those countries.

As you know Croatia is getting to grips with being part of the EU and may not interpret the law correctly - as in their insistence of a T2L. Any attempt to charge VAT on a boat where VAT has been paid in another state would be against EU law. VAT can only arise from a "chargeable event" and just sailing from one EU state to another is not an event.

As for other states asking for proof, this seems now to be a very rare event, and invariably (from the stories) where there is something about the boat that is "irregular". Even when people have been asked and do not have the proof, no action seems to be taken - unsurprising because it is not against the law. The requirement for proof is in the directive, but not in law.

 

[jonic]

I can tell you for a fact that I know of a boat that has been cruising for years in the med with no problems but not the best VAT papers - has been under arrest for a month in Spain as the Spanish have now decided they are not happy with the papers. And the papers are nothing to do with the current owner.

 

[Tranona]

I can tell you for a fact that I know of a boat that has been cruising for years in the med with no problems but not the best VAT papers - has been under arrest for a month in Spain as the Spanish have now decided they are not happy with the papers. And the papers are nothing to do with the current owner.

That suggests something irregular has occurred in the past that could have led to a chargeable event, rather than simply a lack of a VAT invoice.

Would be interesting to know the background.

 

[rogerthebodger]

The requirement for proof is in the directive, but not in law.

Does Not then make the "directive" unlawful and therefore the request under that directive unlawful.

Surely the arrest of a vessel without proof of an infringement of the VAT law constitute false arrest and therefore also unlawful and open the authorities to a charge of false arrest.

 

[rotrax]

Try argueing that in Spain......................

 

[Tranona]

Does Not then make the "directive" unlawful and therefore the request under that directive unlawful.

Surely the arrest of a vessel without proof of an infringement of the VAT law constitute false arrest and therefore also unlawful and open the authorities to a charge of false arrest.

Yes in theory. The offence is not accounting for VAT, not just not having "proof" - which in reality never exists (at least in the UK). VAT is not a once and for all asset tax, but a tax on transactions. While the asset determines whether VAT might be charged, it is the nature of the transaction that determines whether tax is payable. Fine distinction, so the boat is being impounded because the authorities believe that a transaction has taken place involving the boat and VAT not properly accounted for. To make any sense of what is actually happening you need to know the history of the boat and what event is causing the concern.

In this case the most likely explanation is that the boat has been out of the EU (or may even have originated outside) and imported without paying VAT - or not having satisfactory evidence that VAT has been paid. As an example, many EU citizens keep their EU VAT paid boats in Turkey. However, if they sell the boat in Turkey and the new owner wants to keep it in the EU, VAT is payable before it can be used. There are simple ways round this, but not everybody realises this so ignorance can lead to all sorts of problems down the line.

There are all sorts of more esoteric reasons - for example up until around 2002 charter boats sold off after their charter use did not pay VAT, but should have come with a certificate from the Greek tax office saying no VAT was payable. As you might imagine this is open to abuse and/or may not be acceptable in other states.

The other distinction you have to recognise is the difference between a Directive and law. The Directive sets out the purpose of the "rules" but it is state law, and its interpretation that turns it into local law. When there is an inconsistency between the local law and the Directive, it is open to appeal to the European court. Not something an individual would want to pursue through choice.

 

[rogerthebodger]

"it is the nature of the transaction that determines whether tax is payable "

I totally agree with this statement, having had to deal with South African Customs & Excise for over 20 years.

As the offence is not "accounting for the VAT on a VATable transaction" the offender is the person of VAT registered organisation that has caused the offence and not the boat involved in the offence so how legally can the VAT man arrest the boat as it has no part in the non accounting for the VAT raised due to the transaction.

The problem can come from the fact that if I buy a boat from a VAT registered vendor and loose the VAT invoice but have the bill of sale and the VAT vendor does not pay the VAT charged over to the VAT man how can the boat that I own and have proof arrest my boat as the seller has not paid the VAT that he charged me.

The same can happen if I sail my boat into the UK and do not import it correctly paying any duty and VAT then sell it to a third party. It me that has committed the offence and not the boat or the new owner. The problem for the authorities is that I may have left the UK so cannot be held to account so the easy think to do is to "arrest: the boat and claim the VAT from the new owner which I consider is unlawful.

We some times have the issue with visiting boats the stay too long (6 month is allowed) without going through the import process and paying duty and VAT. The law states this and it must happen even the owner is not resident in RSA. This BTW tends to be waved as we want people to visit and spend money even the government forget this all the time.

In my case in South Africa having purchased the hull of my boat from a private individual who did run a VAT registered company and then I purchased all the equipment and materials to finish the boat and paid VAT where applicable on the material and equipment, it would be difficult to prove VAT and all items was paid therefor VAT has been accounted for on all the individual transactions.

In my case I think the SARS (our HMRC) would go and harass someone else. This was my tactic when SARS (C&E) would demant info from me about my customers.

IMHO a lot of the problems come from most people( you excepted) don't know the laws and the authorities also don't know or want to know the laws and see a chance to get money from ,in this case, unsuspected sailors visiting other countries and take chances.