VAT Satus - please help!

[NigelChattin]

As many of you now know, I’m in the process of buying a 1987 Princess 415. The help and advice you’ve given has been a great help over the last few weeks but I have one more (hopefully final) question I hope you can help with.

The current owner of the Princess 415 can not prove the VAT status of the boat. She was sold to the previous owner, some years ago by a yacht broker, and at this point a 'guarantee' that VAT had previously been paid was provided. Unfortunately the brokerage company that provided this guarantee has now changed ownership. As the boat is now 20 years old I also doubt that Princess Yachts will be able to provide the original Bill of Sale.

Do need to worry about this? Will the fact I can’t prove the VAT status of the boat cause problems for me if I buy her, and if so, how can I go about proving what the VAT status is?

I realize this is quite a topical issue but if anyone could give me any help I’d be very grateful.

Thanks,
Nigel

 

[Nautorius]

Nigel,

My understanding is that without the VAT receipt you will need to prove her build date and the date she entered commision. You will also have to prove she has stayed in the EU since (1992?). What you need is lots of old receipts for mooring and servicing. If you have these I believe (may be wrong) that you do not need to prove VAT paid status.

Cheers

Paul /forums/images/graemlins/smile.gif

 

[Whitelighter]

While Princess will probably not have a VAT invoice to their dealer, you will find that they can probably tell you which dealer supplied the boat. They, in turn, may well be able to confirm that VAT was paid when the boat was new by way of their records.

Of course, the Princess network has changed over the years, but you may get lucky. Another option is to show the boat was in the uk before and after 1992 - this can be a berthing invoice, service invoice or similar - so check the history with the boat for relevant paperwork.

If you have no luck, then there is a pontial issue. I personally don't know of anyone in the UK who has been asked to prove VAT on a boat here, or for that matter in the EU. There have been a few threads on this lately. I beleive the issue may be when you come to sell the boat. As you are finding now, without proof of VAT payment there is a potential risk (no matter how small) that in some point in the future you or a future owner *may* be asked to pay the VAT. If you are comfortable with this, any future buyer may not be.

 

[Skyva_2]

Re: VAT Status - please help!

For what its worth, from the RYA website:

"The results of our recent VAT survey have shown that there appears to be only a relatively small number of members being boarded and checked for proof of VAT status, little evidence of members being impounded and no evidence of any UK resident being fined for lack of VAT paperwork whilst cruising abroad."

As Jez says its probably more of an issue when selling on.

 

[gjgm]

perhaps more by rumour than fact, there is a suggestion that you might risk more VAT issues if you take the boat on a trip abroad. Other than that, as Jez suggests, its really just a question of whether the next owner will be as comfortable as you, if you decide its not a worry. I cant see a seller agreeing to knock 17.5pct off the price for example.
If you dont have the Original vat invoice, I seriously doubt that you will manage to generate one after all these years, but then, to repeat, its only likely to be a possible issue when selling.
I dont think many are going to be that worried about VAT invoice on a 20 year old boat.. its almost not even reasonable to expect the piece of paper to have survived! As long as you accept that, and can sleep at night, I'd go ahead and enjoy the boat.
One way to feel more comfortable is to think, ok, at worst it will cost me 17.5pct of the boat value. But what is the risk of that happening ? 5pct?10% 25pct? Who knows, but lets say on a 20year old boat, there is a 10pct chance. So you try to get an extra 2pct off the boat price (10pct of 17.5pct,rounded up). Now you have "charged" against the likeliehood of having to pay. Just a numbers game of course, but might mean you feel better knowing you ve at least priced the risk!

 

[NigelChattin]

Re: VAT Status - please help!

Thanks for your advice on this.

This may just be wishful thinking but when I come to sell the boat could I not just sell the boat to a 'friend' for a value less than I may otherwise accept, pay VAT on the boat at this point, and then buy the boat back from my friend complete withh VAT paid status for the same nominal amount?

Would this actually work?

 

[Whitelighter]

Re: VAT Status - please help!

I think technically that would be VAT fraud, or avoidance, or something. Again, unlikely to get caught as who can truely say the value of a used boat 20 years old.

Been done with US imports ect. Invoice showed 50% of price as boat, 50% as services rendered so not subject to VAT on 50%

 

[mainshiptom]

Re: VAT Status - please help!

Yes this could work but illegal !

what you could do now is drop the boat price by 17.5% that is what I would do !
and pay the vat man or have the money ready just in case,

are you planning to abroad in the boat?

Tom

 

[NigelChattin]

Re: VAT Status - please help!

Ok, well that doesn't sound like an option then!

Yes I am planning on taking the boat abroad for holidays, would this cause a problem?

Is it realistic to ask the owner to drop 17.5% on a 20 year old boat? What are the implications of not being able to prove the VAT status?

 

[brianrunyard]

Re: VAT Status - please help!

I didn't think it was legal to charge VAT unless you're VAT registered?

 

[gjgm]

Re: VAT Status - please help!

would you drop the price 17.5pct if you were selling on the VAT basis on a boat that age? I think its ridiculous, and its probably ridiculous to ask for anything to be taken off. I would just take a bit off from your offer as "insurance", and not bother discussing it with the seller the reason why, coz i cant imagine any sympathy... and then you risk losing that margin. Incidently, someone on here ran a survey on VAT.. cant remember the stats, was it 50pct of boatowners didnt have proof?

 

[Deleted User YDKXO]

Sorry but I don't agree with other replies to your post which seem to be along the lines of nobody bothers to check VAT status so buy the boat anyway. I would make the following points

1. If the advert or sales particulars state that the boat is being sold VAT paid, then the current owner is contractually obliged to prove it's VAT status. Even if the sales particulars don't mention VAT status, you have the right to assume that VAT has been paid unless it explicitly states VAT has not been paid
2. Whilst there may be little or no checking of VAT status of boats now, who knows whether that situation will change. You cannot assume that you will never be asked to prove VAT status
3. Whilst you may be happy to accept the status of the boat as it is now, potential future buyers might not so the future value of the boat when you come to resell is potentially compromised

IMHO, you should demand that the owner proves VAT status to your satisfaction before you complete the sale. It's amazing what paperwork can suddenly be found if you stick to your guns. I did this with my current boat. I threatened to pull out unless all original title and VAT paperwork was supplied before I completed the purchase. It took several weeks and more threats before the owner finally got the message that I was serious and, surprise, surprise, the paperwork appeared

 

[Whitelighter]

if you look mike, i think we agree.

 

[Deleted User YDKXO]

Jez, yes I know you said it but the general thrust of other replies has been along the lines of don't worry about it

 

[Whitelighter]

Sorry, that came across a bit more defensively than twas meant

 

[gjgm]

was your boat 20 years old? Problem I see with your argument is much the same as the problem the VAT boys have. How do you balance being unable to prove VAT has been paid with the assumption that if you cant, it means VAT hasnt been paid. My reading of the recent replies to RYA is that the powers that be do not see a significant (and I will add "fraud") problem that needs a change in legislation. In other words, they can live with the current set up. I m sure they have adequate powers to persue dodgy cases,and dont see it necessary to run round marinas asking for missing documents from all and sundry.
Now, when I bought my little three year old boat recently, I also insisted on the VAT proof, because I think it would be reasonable for me, and in a year or two's time the next owner, to expect proof so soon . Would I really expect, or expect some one else, to demand proof on a 10/15/20 year old boat?
To demand 17.5pct off assumes that you assess the risk as being 100pct that you will be asked to pay the Vat, or that subsequent owners will demand 17.5 off. Thats not reasonable in this case. What appetite anyone has for risk is up to them, of course, and how they choose to assess it.

 

[Deleted User YDKXO]

Having just spent the morning with 2 Revenue inspectors who stuck rigidly to each and every letter of their law, I would not like to rely on the goodwill of a Customs inspector when it comes to proving the VAT status of a boat. If you can't prove the VAT paid status of your boat, then IMHO Customs may well take the line that the boat is not VAT paid. And, don't forget that we're not just talking UK Customs but potentially French or Dutch Customs if the boat visits there and as Dutch customs have recently been acting tough over red diesel, you could easily imagine them acting tough over VAT paperwork
There are plenty of boats on the market. No buyer has to buy a boat with dodgy VAT paperwork. IMHO, NigelChattin should hold out for the paperwork or walk away

 

[jfm]

I don't see any basis in UK law for your statement mike "you have the right to assume that VAT has been paid unless it explicitly states VAT has not been paid". You don't have any such right. It's caveat emptor.

When you agree a price for goods as a retial customer from a VAT-registered seller, that price is taken to be VAT inclusive under UK law unless the seller expressly says it is exclusive of VAT. But that's an entirely different matter from buying a secondhand boat where the issue is VAT on a transaction 20years ago rahter than VAT on today's transaction

I'm worried there is much VAT scaremongering on this forum. Suppose the Princess was sold or imported into the UK in a dodgy deal 20years ago and somehow VAT wasn't paid on it. The VAT liability 20yrs ago was/is an obligation of the parties to that transaction/importation 20 years ago. On what basis do people think the liability can attach to someone who buys the boat in 2007 in good faith? Or can attach as a kind of lien/mortgage to the boat itself? I don't see anything in the law that does this, though I'm happy to be corrected. Unless the liability can attach to the new owner of the boat or the boat itself, surely there's nothing to worry about

 

[gjgm]

absolutely fine-thats how you assess it. I m only pointing out that according to RYA survey(which may or may not be representative, but I m sure we d have heard more if there was a real problem) its almost unheard of for a boat abroad to have this VAT issue raised on a short trip. That doesnt run with the rumour mill, of course. Secondly, it appears through discussions with Customs/Vat, that they dont have a big issue with absent paperwork on the majority of boats.
So if you combine that new background with this buyers situation.. what to do? And I dont see the correlation between ongoing business VAT checks and a 20 year old boat.
It seems today that, in fact, no one is interested.
Yep, your thoughts are, magically produce the missing document, or change the price, or I walk away. My view is, make a judgement on what risk you are genuinely taking. Lots of variations on what values a boat, and I dont agree there are plenty of suitable boats around. Add in prefered model, service history,age,condition,price,location etc etc, and suddenly there seem very few!!
I guess he's got two different opinions as to what to do. Like always when buying a boat, its very individual how you decide what your final offer is /forums/images/graemlins/wink.gif

 

[mont]

My researches direct with marine department at C & E resolved that :-
1) Is there proof that the boat was sold in UK 20 years ago.
2) There is no evidence that its perhaps just arrived from Channel Islands / outside EU etc. and VAT has not been paid.
3) Its registered in UK - Part One - proving when it first arrived.
4) Its a private sale.
They seem not very bothered if there some of the above evidence and did say that they could not levy VAT on a private individual anyway.
Why not just run the facts passed them to reassure you ?