Zero VAT rated UK boat - implications for UK buyer?

[wonkywinch]

Looking at buying a 7 year old UK boat that has never left these shores, was zero rated at original purchase in the UK as the first owner was disabled. It's had 3 private owners since, still in the UK, never put on the ships register. As a private buyer, need I be concerned? I will want to sail it to the near continent so need to register it so second question part 1 or part 3?

The paperwork all looks in order with transfer docs between original owner to current owner looks kosher but nobody has ever paid VAT. One to avoid or is this a normal tax avoidance technique?

 

[Robih]

That’s interesting, didn’t know that was possible. From a technical VAT perspective VAT has been charged at Zero rate and therefore I would say is tax paid. When the disabled previous owner came to sell (assuming not VAT registered) there would be no necessity/ability to levy any VAT on that sale transaction and so on down the line. Sounds okay to me.

 

[wonkywinch]

The original boat was modified (throttle relocated and some extra lights added) so I wonder whether this was a tax wheeze or the original buyer genuinely needed to mods to be able to sail. They owned it for less than 18 months before it started to change hands in 2018. I'm naturally suspicious but if it saved them 20% and they had free sailing, good luck to them but I don't want to be the fall guy when HMRC come knocking.

 

[Stingo]

Don't worry, @Tranona will be along soon and he is very well versed on such matters.

 

[Tranona]

Don't think there is anything to worry about as zero rating is different from VAT being reclaimed as for business use where the seller will be VAT registered and therefore the sale is a chargeable event. Can't see why HMRC would have any reason to call on you. If there was any offence committed it would be by the original owner and you are a good faith buyer 4 times down the line. Your bill of sale will give you clear title.

Either Part 1 or Part 3 are perfectly acceptab;e for visiting other states. Part 3 registers your title but is more expensive because of the survey. You need record of clear title going back to the beginning which it sems you have.

 

[wonkywinch]

Many thanks everyone. Now waiting for the survey.

 

[rogerthebodger]

If you buy a secont hand item from a private individual (non vat registered) no vat is paid.

Is this correct.

The sale on the for sale forum does not attract and VAT

This is how VAT works in the country I live.

The only VAT I paid was on the agents fee

 

[andsarkit]

Either Part 1 or Part 3 are perfectly acceptab;e for visiting other states. Part 3 registers your title but is more expensive because of the survey. You need record of clear title going back to the beginning which it sems you have.

Typo there. Part 1 requires the survey and Part 3 is the simple SSR.

 

[Robih]

If you buy a secont hand item from a private individual (non vat registered) no vat is paid.

Is this correct.

The sale on the for sale forum does not attract and VAT

This is how VAT works in the country I live.

The only VAT I paid was on the agents fee

Correct, VAT is not charged by a non VAT registered individual or other legal entity.

 

[Fr J Hackett]

Correct, VAT is not charged by a non VAT registered individual or other legal entity.

But if a person has avoided paying VAT on the original purchase ( legally ) but then sells the boat on does he not have to then pay the VAT?

 

[Robih]

But if a person has avoided paying VAT on the original purchase ( legally ) but then sells the boat on does he not have to then pay the VAT?

There is something called the Capital Goods Scheme (CGS) whereby a change of intended use of the asset causes a VAT adjustment. So. For example, an asset initially purchased and intended for use in a Standard/Zero rated VAT environment is subsequently reassigned in to an exempt environment. That might cause a claw back of previously claimed input tax (VAT). But that is repayment of Input Tax previously claimed. In the OPs situation VAT has been charged at Zero rate by the yacht supplier, it hasn’t been reclaimed by the original disabled owner of the yacht. Therefore it’s not immediately obvious that the CGS applies here. It would be interesting to know what happens if a Zero rated residential boat is subsequently sold in to a standard rated environment - for example in to charter or hotel boat, its a close parallel to the OPs situation. VAT - the simple tax they said in ‘73, but it never was!

 

[rogerthebodger]

My understanding is that VAT is a transaction so only charged on a transaction with a VAT registered vender

When I emigrated to my current country I paid no Duty or VAT on my personal affects and if I sold any of my personal affects I would not have to pay any duty or VAT to anyone

 

[Dellquay13]

But if a person has avoided paying VAT on the original purchase ( legally ) but then sells the boat on does he not have to then pay the VAT?

No, in this case the original buyer bought a zero vat rated item, and then sold it 2nd hand as a private individual, they were not avoiding vat.
Just like a parent buying zero vat rated school uniform and selling it second hand a couple of years later
Even when buying things B2B between vat registered businesses, vat is paid at the time of the sale and reclaimed from its later onward sale, it isn’t avoided.

 

[MisterBaxter]

But if a person has avoided paying VAT on the original purchase ( legally ) but then sells the boat on does he not have to then pay the VAT?

The original buyer didn't avoid paying VAT, they paid it at the legal rate, which happened to be zero, so their VAT obligations were fulfilled just as they would have been had they been obliged to pay 20% and paid it.

 

[Biggles Wader]

I am surprised that a boat could actually be zero rated because the buyer was disabled. Im assuming this is a pleasure boat rather than an essential means of transport for the original buyer

 

[Rappey]

VAT relief for disabled.

Boats​

You’ll not have to pay VAT if you buy a boat which is designed or, before it’s sold to you or imported, has been substantially and permanently adapted for use by a disabled person.
An eligible boat will include many features specifically for disabled people such as specialised washing and lavatory facilities, wheelchair clamps and specialist steering facilities.
Your supplier is responsible for determining if an eligible boat is being supplied.

Seems you can also pay zero vat for a houseboat as long as its no less than 15t .

 

[Lucy52]

VAT relief for disabled.

Boats​

Seems you can also pay zero vat for a houseboat as long as its no less than 15t .

For a houseboat, you don't have to be disabled. Wide beam, narrow boat builders will supply a boat of a size that will be zero-rated, If it is intended to be your home. The good thing is, you then don't have to pay VAT on your mooring fees either. Hence, the proliferation of, “Fat Boats” on our canals.

 

[wonkywinch]

I am surprised that a boat could actually be zero rated because the buyer was disabled. Im assuming this is a pleasure boat rather than an essential means of transport for the original buyer

It is a regular WPB. We've now purchased it and sorting out paperwork. Surveyor revealed it is on the UK Part 1 register in the "merchant" rather than "pleasure" category.

UKSR sorting out name change/reregistration quite efficiently, even responding to my emails on a Saturday *

* fully aware registration process unconnected with HMRC VAT