BOAT SALES - VAT - Evidence of VAT status

Yachtsmen across the board have been very casual about keeping the VAT receipts for their yachts and of course until recently, this wasn't such a problem. This has now changed and it has become a major issue (in many circumstances fuelled by some of the yachting press and forums full of hysterical false rumours of Revenue men in black boots boarding vessels, demanding proof of VAT  payment and seizing boats and sailors at sea) This is for the main part rumour, particularly for most regular value vessels.

Higher value vessels (over 200K) are scrutinised much more carefully however, it is vital that anyone involved in selling boats has a good understanding of VAT  and how it affects boats.

In many cases the original VAT receipt issued may not show a VAT number or invoice number or may have some other sort of error or omission, particularly when the yacht was manufactured or distributed by a small company. We normally find that this being the case the company in question is now out of business or no longer holds any records (they are only obliged to keep them for 7 years). In other cases the owner has no VAT receipt and probably bought the yacht without one. Alternatively, he may have a copy which is accepted by the UK Revenue and Customs Authority but which may not be accepted by a finance house.

There are also swathes of other yachts which were manufactured prior to 1985 and if in the EU on 31 December 1993 at midnight are exempt of VAT under the terms of the relevant directive. Finding proof of their location all that time ago is now very, very difficult. The ports where they were moored no longer have records and over the mists of time, a lot of owners have lost whatever proof they ever had.

VAT on boats has always been an issue and is becoming more so.

Boats being used in the EU should have VAT-paid status unless they are just visiting. The original VAT invoice, from when the boat was either first bought within the EU or when it was imported from outside the EU, is usually sufficient evidence. A boat that is VAT-paid but is sold outside the EU loses its VAT-paid status and therefore VAT must be paid if the boat is brought back into the EU.

The above applies to all boats built or brought into the EU since 1 January 1985, or on the joining dates of States that have become EU Members since then. Boats already in EU Member States and territories on 1 January 1985 pre-date the requirement.

The evidence of VAT-paid status will generally be an invoice, showing the VAT element and a VAT number, or similar document, such as a completion statement. Boats sold between companies should show the VAT element on the invoice. Some EU states (notably Holland) ask for the original invoice, but otherwise a certified copy kept on board should be adequate. Keep the original and a couple of certified copies safely elsewhere. It is vital to pass this information on when the boat is sold, as it may be requested by Customs officers in either the UK or elsewhere in the EU.

In the case of home-builds and fit-outs, copies of all the major invoices should be kept and passed to subsequent owners to show VAT-paid status. Customs Notice 8 sets out further details.

Please note that HMRC do not have copies of individual VAT invoices from boat builders, dealers or other boat sales transactions.

Value Added Tax was introduced in the United Kingdom in 1972, as a tax on the supply of services, and on the sale or import of goods. Any yachts built in or imported into this country for private use since that date should be  VAT paid and ideally a seller of a yacht should be in a possession to provide the buyer with the yachts original  VAT receipt, or at least a copy certified by the builder or original supplier as being a true copy. Unless the seller is able to produce proof that  VAT on the yacht has been paid at sometime, either in the UK or elsewhere in the EC, the buyer should be ready to face a potential  VAT assessment on the current value of the yacht at any time an EC Customs official carries out a spot check.

Until the end of 1992 it was possible for a yacht built in the UK, for a UK resident, to be exported immediately upon completion without payment of  VAT, for use overseas on a tax free basis. The International Convention on Temporary Importation provided that all convention countries should permit the free use of recreational equipment and "means of transport" for touristic purposes for a minimum of 6 months in any one year. This rule was interpreted more liberally than the minimum in most European countries including France, Spain and Italy, and over the years tens of thousands of yachts built for northern European owners enjoyed tax free status in Mediterranean marinas.

The completion of the Single Financial market on 1st January 1993 saw the end of concessions of this sort between EC states. Apart from a few months grace for yachts already enjoying tax free status, any yacht in any EC State, owned by a national of any EC State for his private use, must be  VAT paid. In theory it should make little difference which State the  VAT is paid in, since rates are intended to be roughly equivalent. In practice however, experience has shown that some States tend to be considerably more flexible in agreeing modest valuations with owners, and allowing payments to be spread over an extended period. The importer of a yacht from outside the EC will therefore find to his advantage to import to another EC State where a valuation and payment terms have been agreed in advance (in writing) before bringing it into this country. Once a yacht has been imported into any EC State and  VAT paid, in theory no further  VAT liability can arise within the EC. The completion of the Single Financial market on 1st of January 1993 also saw the introduction of an amnesty for any yacht in the EC built on or before 31st December 1984.