VAT status for second hand boat

[seer_green]

Hi. Apologies if this has been asked before, I've tried to search but it is excluding the key terms as too common.

I'm looking to buy a second hand boat. Apparently it has been back in the UK for ~2 years after spending more than 10 years in Europe.

The broker has suggested that the VAT status of the boat isn't important as HMRC only go after super yachts however I've been reading that since Brexit there may be checks at home and abroad. I don't currently know the VAT status of the boat as it hadn't crossed my mind until mentioned by the broker. I will ask next week though.

This will be my first boat and I am quite new to sailing so I'm hoping that someone can give me some clear advice on this. What should I expect in terms of VAT status and might it be an issue if there isn't documentation?

Thanks!

 

[ylop]

Presumably the broker only brought it up because he knows there is a problem. In my view a boat is worth less if it not VAT paid. Others will be less concerned, particularly if they have no intention on leaving and then returning to the U.K. However when you come to sell it, at least some of the buyers will be in “my camp” and therefore expect to pay less for a VAT uncertain boat. If offered 20% less you might find the broker/seller are suddenly able to put the effort in to remove the uncertainty- or of course in the current climate will find a different buyer who is willing to overlook it.

 

[jac]

Unless able to prove VAT Status you could end up with a nasty bill either here or in the EU. I would treat it as VAT not paid and insist on a 20% reduction in price, then pay the VAT when asked.

 

[Sandy]

I have written to my MP three times about this and only get pointed at the current rules. The thing is they don't answer the question. I have come to the conclusion that HMRC don't know.

 

[RJJ]

Three questions. The letter of the law, the burden of proof, and the practicality.

First, if she was EU VAT paid originally (which includes uK VAT paid and taken into mainland Europe) then her VAT status now is entirely determined by where she was on 31st December 2020. In UK - and she now counts as UK VAT paid. In EU - and she now counts as EU VAT paid.

Second, whatever she actually is, and what you might want her to be, do you need to prove it? To prove UK VAT status it is probably enough to get a letter from the marina or HM at that time (which I have for my boat, which was previously VAT paid in Holland).

Third, who cares unless you are challenged? The broker is effectively saying you can take the risk. It sounds to me as though she may be EU VAT paid and they are trying to pass her off as UK (it wouldn't be difficult to get an HM or marina letter otherwise). I suspect it's true that there are few or zero UK VAT challenges on small boats....but personally I would prefer not to take the chance. On the flip side, some EU countries are militant on VAT...we had friends pulled in by the gendarmes in one of the Caribbean Islands and shaken down for a 5k fine for incorrect VAT status.

My position would be: (the broker) provides evidence of whatever VAT status you claim. Otherwise you (the buyer) have to assume VAT is payable and you need the price to reflect this.

That said, 20pc isn't that far from a reasonable bargaining range or partial refit on many yachts. Perhaps the price is right anyway.

 

[sailaboutvic]

Hi. Apologies if this has been asked before, I've tried to search but it is excluding the key terms as too common.

I'm looking to buy a second hand boat. Apparently it has been back in the UK for ~2 years after spending more than 10 years in Europe.

The broker has suggested that the VAT status of the boat isn't important as HMRC only go after super yachts however I've been reading that since Brexit there may be checks at home and abroad. I don't currently know the VAT status of the boat as it hadn't crossed my mind until mentioned by the broker. I will ask next week though.

This will be my first boat and I am quite new to sailing so I'm hoping that someone can give me some clear advice on this. What should I expect in terms of VAT status and might it be an issue if there isn't documentation?

Thanks!

You don't say how old the boat is .
Do the broker have copy of the original invoices if so it will probably have the vat on the invoice .
If the boat is VAT paid no matter where and as only been back in the UK for two years , ask for prove where the boat was in Dec 2020 as that will determined where vat is valid.
Forget what the broker days about HMRC , it's you they be after if and should you be asked for prove .
Lastly as and most importantly as
RJJ said when the time comes to sell you most likely be ask for vat prove that it's been paid .

 

[Tranona]

Just to add a couple more comments. The 31/12/2020 is crucial as if it was in the UK on that date it is considered VAT paid in UK. If it was brought in after that date then it was the importer's responsibility to inform customs and pay VAT if due. There are reliefs available if certain conditions are met and even if imported after that date there may not have been any liability for VAT. In practical terms very few boats were imported during 2020 because of Covid, So 2 years suggests it was before the B date. You just need evidence.

If it has been illegally imported the liability is with the importer, not you - even if you buy the boat. It is simply not good enough for the broker to be so vague. He should carry out due diligence with his client (the Vendor) and provide you with written evidence of the boat's status. Without that the risk you run is not paying the VAT as you have no liability, but HMRC pursuing the importer and possibly making you life difficult by holding the boat. This is highly unlikely as HMRC have much more important things to worry about. However as you see from responses here some people are wary of that risk and there may be difficulties when you come to sell. The idea that the boat is devalued by 20% is nonsense, because there is no way you can pay to restore that. You can't just walk into the tax office and say you think VAT is owed on your boat, please can you pay it. VAT is a tax on transactions and in this situation the only transaction that might give rise to VAT is importing the boat.

The last case I read about where somebody had bought a boat knowing that VAT had not been paid on import, customs advised that as the import took place more than 6 years ago it would not be pursuing the importer so was no longer interested. Not quite the same as saying it was considered VAT paid, but some reassurance. I should add that this was in the IOM and could not say whether UK HMRC apply the same rule.

 

[KompetentKrew]

To add a differing view, VAT status seems to be so poorly monitored or policed that I don't think it's worth paying much of a premium for.

It's regarded as a big deal on these forums - probably a few people here have heard horror stories but the reality is that it's rare for HMRC to investigate or make demands.

I don't think VAT on a boat is legally any different from VAT on a musical instrument or a laptop computer - if you buy one on holiday you're supposed to declare it for VAT if you import it. But people don't worry about VAT on secondhand guitars or laptops. It's true that there's a slight chance HMRC will enquire into the VAT paid status of a boat (whereas it's practically zero for a secondhand laptop you buy on eBay) but it's still very low. You're not expected to be able to prove the VAT status of other secondhand goods - the only reason it's a thing for boats is that they're valuable enough that the VAT may be significant and also because they're likely to cross borders.

Someone above suggests that you demand 20% off the price to account for the cost of VAT (actually I think it should be less than 20%? More like 16%?). Whether the seller will agree to this has as much to do with how desperate they are to sell the boat as the actual VAT status. If he can find someone else that's not bothered by it who will take the boat for asking price then he has no need to give you the discount. So if the boat has been on the market a while and the annual marine fees are due then maybe he'll go for it, but if he's only just put it on the market then he probably won't.

Anyway, if the seller sells you the boat for 20% off (or however much it is), what are you going to do? Rock straight up to HMRC and say "here you are, guv"? I wouldn't. I'd stick the money in my ISA so it's available should HMRC ever come looking for it in the future and, on past form, there's at least a 90% chance they won't.

I don't think this is the single factor that should drive your boat purchase. I was very taken with the design of a Nicholson 39 I viewed in Chichester, but it was stinky with mould in a cabin where there'd been a rain leak. There was only one other Nicholson 39 for sale in the UK, so I drive hundreds of miles to look at it, twice, before putting in an offer. I think there may have been one or two other Nic 39's available in the whole of Europe that year. I ended up with a Van De Stadt Caribbean, which is also similarly uncommon, and some of the features of mine make it even more rare. So if this is the exact model of boat you want then you might not have many options.

I spent close to £50,000 on my boat and immediately spent about £4000 on replacing the standing rigging. Various other costs of running a boat are eye-watering. So if I had to pay £10,000 in VAT then it would not be the end of the world, nor disproportionate with the other ordinary costs of yacht ownership. Obviously you're going to try to get the boat as cheaply as you can, and this is a potential cost that you have to consider alongside the costs of other boats you're looking at.

My boat is VAT paid in the EU and presently in the EU, so this is not something I have to worry about myself. Obviously you should try and ascertain the VAT status of the boat and I agree with a previous comment that the seller should be keen to prove where the boat was on 31/12/2020. But I also think you have to look at the big picture, and the risk of getting asked about it is low.

Probably some will disagree.

 

[westernman]

If you are a private person buying something second hand in the UK, then VAT should never be an issue for you the buyer.
How often do you worry about this when buying a second hand car. Exactly the same thing as far as VAT is concerned.

 

[Irish Rover]

Could I summarise #8 by saying the risk of getting caught is low to minimal - still there's a risk and only the OP can decide whether it's worth it or not.

 

[KompetentKrew]

Could I summarise #8 by saying the risk of getting caught is low to minimal - still there's a risk and only the OP can decide whether it's worth it or not.

Yes, that was the intent of my comment - there are many factors to be considered when buying a boat, and VAT status should not be the sole defining one.

Sorry I'm so verbose.

 

[westernman]

Could I summarise #8 by saying the risk of getting caught is low to minimal - still there's a risk and only the OP can decide whether it's worth it or not.

It is not the OP who might get caught, but the seller. The OP has no risk (apart from when he wants to sell the boat, and buyers ask for proof of VAT status).

 

[Irish Rover]

It is not the OP who might get caught, but the seller. The OP has no risk (apart from when he wants to sell the boat, and buyers ask for proof of VAT status).

See #7 - the risk is being caught in the crossfire between the importer and HMRC

 

[sailaboutvic]

I think some are missing the point here ,
Come selling day the boat may not be as attractive as one that vat can be seen to have been paid.
Plus where once vat didn't really matter if you read HMRC on boats there advice is to carry prove the boat is vat UK paided if your boarded ,
now this was never the case before we left the EU which make you think there could be more question ask now then before.

 

[westernman]

I think some are missing the point here ,
Come selling day the boat may not be as attractive as one that vat can be seen to have been paid.
Plus where once vat didn't really matter if you read HMRC on boats there advice is to carry prove the boat is vat UK paided if your boarded ,
now this was never the case before we left the EU which make you think there could be more question ask now then before.

Do you do that for your second hand car? Same laws and principles apply.

 

[Irish Rover]

Do you do that for your second hand car? Same laws and principles apply.

Would you buy a 2nd hand car that you suspected might have been illegally imported without paying the appropriate taxes?

 

[westernman]

Would you buy a 2nd hand car that you suspected might have been illegally imported without paying the appropriate taxes?

If it is properly taxed and registered, I would not even bother to check.

Did you ever ask questions about VAT when you bought a second hand car?

Normally no. It is not you which is committing a fraud. There is no taxable event which is taking place when you buy the car (or anything else for that matter).
Do you check that amazon is properly paying the VAT on stuff you buy from them? Of course not. Not your problem.

 

[Whiterose]

Having and still involved with this problem ..my advice is ..keep your head down …but even if boat has been in Europe VAT will have been paid unless in Greece..but the reality is that it’s such a new thingHMRC havent really sorted it yet….but know one knows I think asking for %20 is an excellent idea..

 

[ylop]

If it is properly taxed and registered, I would not even bother to check.

Did you ever ask questions about VAT when you bought a second hand car?

I’ve never bought a vehicle which has been imported to the U.K. (other than by the original manufacturers representative). If I was buying an import I would certainly be doing my dilligence to ensure it’s paperwork was all in order.

Normally no. It is not you which is committing a fraud. There is no taxable event which is taking place when you buy the car (or anything else for that matter).

its not just about you not committing the offence it’s about your ability to easily sell it on in day 5 yrs (when the market may be less bullish than now) and having everything to make your life simple if Border Force do decide to board you etc.

Do you check that amazon is properly paying the VAT on stuff you buy from them? Of course not. Not your problem.

do you buy items at tens of thousands of pounds from Amazon you might want to resell? Always worth beating in mind that whilst a £10k vat bill (or perhaps a £5k legal bill to convince HMRC its not your problem) would be an irritation to some it’s a vast sum of money to others.

 

[Tranona]

I think some are missing the point here ,
Come selling day the boat may not be as attractive as one that vat can be seen to have been paid.
Plus where once vat didn't really matter if you read HMRC on boats there advice is to carry prove the boat is vat UK paided if your boarded ,
now this was never the case before we left the EU which make you think there could be more question ask now then before.

That is different advice as since we left the EU entering UK waters with a boat gives rise to a potential "chargeable event" because you are moving from one VAT area to another. So makes life easier if you do have evidence of VAT payment. However there is no legal requirement to have such evidence - you only have to show that you are not importing the boat. If you are a UK resident with a boat kept in the UK and have just visited France then it is easy to show you are just returning. HMRC are not stupid and know what to look for.

Within the UK if you bought a boat privately there is no reason at all for HMRC to be interested, nor do they go around randomly checking as it is a waste of time. The problems arise as in this case when it is known that the boat came into the IL from the EU recently and the OP is quite right to have concerns simply because there is a possibility that a chargeable event has occurred

The vast majority of boats in the UK do not have documentary proof of VAT payment simply because the law does not require it and yet thousands change hands each year without problems.