VAT Satus - please help!

[Deleted User YDKXO]

Well thats all fine, jfm. So, basically, what you're saying is that anybody who's buying a secondhand boat need never worry about VAT status because it would have been the responsibility of a previous owner to settle the VAT? Well it does make you wonder why so many people are bothered about this issue including the RYA HERE

There is a link to a pdf document from the Members only part of the RYA site. I can't link to it from here but this is part of what it says

It is important to consider the VAT status of a boat when buying or selling secondhand boats and a prospective purchaser should consider this at an early stage of the negotiations. The RYA book 'Buying a secondhand yacht - the legal aspects' is a useful tool for both seller and purchaser
The potential VAT liability is something that all intending purchasers must be aware of. If the seller of the boat cannot produce full documentary evidence of non VAT liability, then arguably the boat is worth only 100/117 1/2 of the asking price

I guess the RYA are wrong then

 

[NigelChattin]

Thanks for all your advice on this, what appears abundantly clear is that there is a considerable amount of uncertainty around what the reality on this issue actually is.

Based on this I'm nervous that, despite the recent announcement that this issue doesn't require more legislation, it does require much more clarity, and what may not be a huge issue at present, may escalate over the coming years.

I've contacted HMRC to try and get a definitive answer, (if a definitive answer does indeed exist) and I shall post their response when they get back to me on this.

Has anyone had any experiance with similarly aged boats?

 

[jfm]

Surprised by the premise in your post mike, that the RYA surely can't be wrong. I dont think the country's sharpest tax/legal eagles are working for the RYA, so on such complex matters I expect the RYA (and HM Customs call centre) to be wrong now and again.

As I said in my post, I'm quite happy to be proved wrong. Show me a law that says a VAT liability of a party to a previous transaction can be enforced on a 3rd party or liened/mortgaged over the boat bought in good faith by that 3rd party, and I'll happily eat some e-humble pie (and before anyone gets clever, this boat transaction doesn't count as carousel fraud so the 3rd party liability rules in the carousel fraud laws don't bite)

If you buy a Rembrandt at Sotheby's or a secondhand buy-to-let flat, you don't worry about whether the seller has paid his CGT do you. Cos the CGT is seller's liability, and doesn't attach to the thing you just bought. So what's the issue with boats?

I can't point you to a law saying I'm right, becuase I'm suggesting there is an absence of the purported law, if you get my drift

 

[gjgm]

not on similarly aged boats, but when buying my last boat, I did enquire direct to them as to what would prove VAT status. Well, I didnt get head honcho, just a foot soldier, but the response was that they would want the ORIGINAL vat invoice. Ok, what are the other options? Er, there arent any.
In fairness, what can they say? Cant exactly say, look matey, dont worry about it, were not interested, can they!
If when buying a boat you are concerned about missing VAT documents, all well and good. No one wants to be awake at night fearing a knock on the door from the VAT bogeyman.
My view is that the risks are so small of you landing in deep water that, go ahead, being aware that there is some slight risk. You may not be at comfortable with that. Of course, there are plenty of other risks that you are taking when buying a boat; you have to be comfortable with those too /forums/images/graemlins/tongue.gif

 

[volvopaul]

Take notice on most of the replies, dont let your heart rule your head, make the owner prove the vat as a broker would have to if it was being sold through one.
Imagine if you wanted finance on a marine mortgage you would not get finance unless you can prove it, it will make things all the better when the day comes you sell it, I nearly lost a sale once because one bill of sale was a copy, it looked as original but was thrown out by Bank of Scotland, in the end I went back to the previous owner before the man we bought it off and yes it appeared ! incidentally he bought it from TONY CHAPPEL how strange,.

So take your time, I know you have spent time and money but its no good buying a dud, plenty more out there and its not as if your dying to get out boating in the rain is it.

 

[Deleted User YDKXO]

jfm, I'm not knowledgeable enough to argue the legal nuances of whether a VAT debt pertains to the boat or the first owner liable to pay it but what I do know is that, under current marine law, other kinds of debt are liened on the boat not the owner. If you buy a boat that has outstanding finance on it or unpaid work carried out on it, the creditor has a right to take a charge on the boat, even if it has changed hands. I don't see why a VAT debt should be any different
In any case, it is all a bit academic because a buyer requires proof of VAT status for a number of reasons. Whether it's right or wrong, most buyers believe that VAT status is important and therefore VAT status will be a factor in determining their valuation of the boat in question so, whilst you might not think VAT status to be an issue, some future buyer of your boat might. Secondly, any buyer wishing to take out a mortgage to buy your boat will need to supply proof of VAT status to the finance company ( I guess that means that the finance company thinks VAT status is an issue in determining boat values as well)
In theory you need proof of VAT status to travel throughout Europe in your boat. Whilst neither you nor I have ever had the VAT status of our boats checked, there's always the first time and I would'nt like to be arguing the finer points of whether the VAT debt on my boat pertains to the boat or the previous owner with a French douanier or a Spanish Guardia Civil officer

 

[[23929]]

This VAT issue is always there. Why not have a VAT amnesty on all boats older than 10 years and say, valued less than £250k ? I doubt if C & E get any unpaid VAT from this group of boats and it would make everything clear for buyers, sellers and people who use their boats to go to Europe on holiday.

For newer boats or more valuable boats, there is a fighting chance the original documents will still be available, so, it would seem reasonable to produce them if asked.

Is this a daft idea ?

 

[jfm]

Yup, agree your second and third paras. Was just putting an alternative view. In argumentative mood today! Though, I did mean it when I said Bangle is genius

 

[Deleted User YDKXO]

[ QUOTE ]
In argumentative mood today

[/ QUOTE ]

Me too

 

[ari]

[ QUOTE ]

As I said in my post, I'm quite happy to be proved wrong. Show me a law that says a VAT liability of a party to a previous transaction can be enforced on a 3rd party or liened/mortgaged over the boat bought in good faith by that 3rd party, and I'll happily eat some e-humble pie (and before anyone gets clever, this boat transaction doesn't count as carousel fraud so the 3rd party liability rules in the carousel fraud laws don't bite)

If you buy a Rembrandt at Sotheby's or a secondhand buy-to-let flat, you don't worry about whether the seller has paid his CGT do you. Cos the CGT is seller's liability, and doesn't attach to the thing you just bought. So what's the issue with boats?

I can't point you to a law saying I'm right, becuase I'm suggesting there is an absence of the purported law, if you get my drift

[/ QUOTE ]

But it's not about previous transactions. My understanding is it simply comes down to this. As a private individual you are not allowed to own a boat that has not had the VAT paid on it. Ergo, if it hasn't, and you own it, it is your responsibility.

No good saying "oh go chase the first owner, it's his problem". Fact is, a boat must be VAT paid if privately owned and used in Europe, and as the owner of said boat, it is your responsibility to be able to prove that it is. (Who else's responsibility could it be? It's your boat).

I've said many times that the VAT situation on second-hand bots in Europe is a joke. Who has original documentation on a 20 year old boat? And even if you have, what happens if it gets lost or destroyed? There is no way to back it up.

Best of all, there isn't even any mechanism in place for you to pay the VAT! If you go to HM Customs and say "hi, I own a 1987 Princess 35 and I have no proof of VAT payment therefore I wish to pay 17.5% of its value to you in VAT", they have no mechanism to process that. It cannot be done!

It's an absolute joke it really is.

Meanwhile, HM Customs are saying "well no one has ever come to us with this being an actual problem so there is no need for us to do anything to rectify the problem as there is no problem".

Stupid stupid situation.

 

[ari]

In fact, this is exactly the sort of issue that MBY et all should be getting involved in as it can affect any of us*.

Be much more useful than regurgitating press releases and boat brochures disguised as "boat tests".


* and before you think "not me matey, I bought my boat brand new and I have my VAT receipt", imagine what would happen if you had a flood or a fire or a burglary or moved house and that piece of paper were lost and the original dealer no longer in existance. Think your insurance company will cough up £17,500 for it if your boat were worth £100,000? Doubt it.

 

[glenndraper]

I think ALL of you should read Revenue and Customs Brief 11/07 it is frightening! it is on their web site.

 

[Major Catastrophe]

[ QUOTE ]
I think ALL of you should read Revenue and Customs Brief 11/07 it is frightening! it is on their web site.

[/ QUOTE ]

I pray for the day I need to take heed of that notice, but know it won't be bothering me in this lifetime.

 

[jfm]

Ari
Not picking a fight but I think you are worng. For tax to be collected from you there as to be a law saying you must pay it and in these circs I dont think there is such a law. The statements you make just are not supported by any law. Happy to be proven wrong if anyone wants to point to the law. I dont care what HMRC say, they dont all know the law that well

Regarding Customs Brief 11/07 , this relates to the leasing schemes sold by firms who advertise in back of MBY and the like. I have read the detailed documentation on these schemes and advised many superyacht owners (and friends privately), and said on these forums, that these schemes are not well designed in my opinion and have been put together by folks that do not understand the law well enough in my opinion. I've never advised anyone to use them and always advised folks who have consulted me not to use them. I think HMRC are basically barking up the right tree with Customs Brief 11/07 and they will be successful in counteracting most of these schemes as the law currently stands. Actually I think you could put toether a leasing arrangement that would work, it's just that many of the firms offering these programs into the market don't in my opinion know how to. But there are far more effective ways of running a yacht tax efficiently than made-up leasing, so why bother?

There is much misinformation on all this. Tax law is very complex and not many folks really understnad it well. MBY journos, RYA legal folks, many HMRC officers etc etc are sometimes a bit out of their depth imho

 

[pheran]

Well I wish the authorities would come up with some definitive, pan-European line on this vexed issue. I, naively, bought my last boat with only photocopied evidence of VAT having been paid. It became an issue when I sold the boat last month, to a Dutchman, in Holland but luckily he was prepared to accept the paper-work I had, inadequate as it apparently was. I now face the purchase of my next boat with some trepidation!