BOAT SALES - VAT - How does leaving the EU affect the VAT status?

Since the UK left the EU there may be some queries on the boats VAT status, hopefully the following will help.

What happens if I have a boat in the EU and bring it back to the UK, or vice versa?

The main issue with Brexit is VAT and which country it now needs to be paid in. Whilst the UK was part of the EU a boat which had VAT paid status could be kept anywhere in the EU. Now things are somewhat different, and where you buy or keep a boat could affect the VAT you need to pay. Essentially, the customs status of vessels will be dependent on their location on 31st December 2020. Yachts which were located in the UK on that date will have lost 'Union-goods status'. This means that they will no longer be regarded as having EU VAT-paid status.

Ultimately, if you want to move a boat to or from the UK/EU you may be liable to pay VAT, even if VAT has already been paid. If for example, your boat has been kept in Spain and has VAT paid status, if you now wanted to move it to the UK you could be liable to pay UK VAT again. However, if you paid UK VAT on your boat and then kept it in the EU, HMRC are offering a Returned Goods Relief (RGR) on British-owned vessels which were located outside the UK when Brexit happened (see below for more on RGR).

Heading in the opposite direction, if you wanted to take a boat out of the UK and keep it in EU waters, you would be liable to pay VAT in the EU, unless you opt to use the Temporary Importation scheme (see below).

In short, if the boat was VAT paid on 31 December 2020 in Europe it retains its European VAT paid status. If it was based in the UK at that time, it will be UK VAT Paid only.

Can you explain the Returned Goods Relief (RGR) and which boats are applicable for it?

In response to the issue of British boat owners potentially having to pay VAT twice on a boat, HMRC has announced that British-owned yachts which were located outside of UK waters on 31st December 2020 fall under the Returned Goods Relief (RGR). This means that as long as an owner can demonstrate that the boat has been located in the UK at some point in their ownership, RGR will apply and they won't have to pay VAT on it again.

What is Temporary Importation (TI) and how long does it last?

For British boat owners this is one of the main benefits of Brexit. It means they can now keep a private boat in EU waters without paying the import VAT of 20% by using the Temporary Admission or Importation scheme. It allows them to keep their boat in the EU for up to 18 months without paying VAT on their vessel. Once the 18 months are up, a boat only needs to be taken out of EU waters for 24 hours before the VAT clock starts again for a further 18 months. A transit log and evidence of time spent outside of EU waters will need to be kept.

I’m British. Can I buy a vessel with Union status and keep it in the EU? Or do I need to re-register it?

If the seller of the boat can show proof that VAT has already been paid in the EU, then the boat will retain the status of Free Movement on purchase, even if you choose to flag it to a UK registry. If you wish to import the boat into the UK you will be liable to pay UK VAT. If you want to keep it in the EU then, as it already has Union status, you can do so. Essentially, as far as customs is concerned, the ownership of a vessel is not relevant, it is VAT paid Union status which is relevant.

In fact, the current thinking by the RYA is that re-registering your boat in another EU country will not be of any benefit and may mean you have to comply with that country’s legislation. While it is unclear what that may fully look like it could include having to show that country’s competence certificates (which may have to be taken in the national language etc).

What VAT evidence do I need to show EU or UK customs officials if asked for it?

Boat owners in the UK and EU will now need to carry evidence of VAT status onboard their vessels at all times in case they are asked for it by customs officials. This includes evidence of VAT paid and evidence of where their yacht was at the end of the transition period.

What do all the VAT changes mean for prospective new and used boat buyers?

Purchasers of new and second hand boats will now need to think more carefully about where they buy their boat and where they want to keep it in the long term. Essentially, paying UK or EU VAT will be dependent on the location of the purchased yacht, not the residency of the person buying it.

If they want to keep their yacht in the UK, it will make sense to buy the yacht in the UK and, if it’s a new boat, pay the VAT in the UK. They can then use the Temporary Importation rules (see above) to cruise in the EU for up to 18 months without becoming liable for EU VAT.

When it comes to used boats, the sale of a boat doesn’t affect the VAT status if it is sold within the region i.e. the UK or EU, where that VAT was originally paid. So if you want to buy a used boat in Spain or France and it is already VAT paid, then you can keep it there irrelevant to your residency status.”

CASE STUDY ...

A customer purchased a boat, in the UK, with NO proof of VAT. They want to take the boat to Spain. Do they have to pay VAT in Spain when they arrive? Since Brexit, even if UK VAT was paid on the boat, wouldn't VAT have to be paid on the boat again due to importing it into the EU?

It would be difficult and not wise for us to give definitive VAT advice in this case.

The main two issues are;

1. The boat can travel to Spain for up to 90 days. Some EU countries may respect the VAT status of boats who paid VAT in UK prior to Brexit but because VAT proof documents are written in English and often not that clear we would not be able to say your client will definitely not be asked for VAT payment again in the future.

As with all VAT issues the client needs to evaluate the risk themselves.

2. Spain is slightly unusual as harbour authorities in Spain are run on a regional basis, so local government officials can interpret the rules differently, making any potential VAT claim for payment open to local interpretation

One solution would be to place the boat on the Polish or Dutch register and flag the boat to avoid closer interrogation by EU customs officials (See the Friends of Boatshed section - https://www.boatshed.com/preferred-partner/boat-&-yacht-registration/311145/ )

Sadly there is no clear answer to the above example! There is definitely no point giving the customer anything other than our experience so far. We have no evidence of VAT demands by Customs in relation to smaller (under 20 metres) boats in UK and EU so far. EU countries are more interested in high value larger yachts purchased via VAT avoidance schemes or Oligarchs trying to hide vessels in EU ports.