UK and European VAT issues explained by a leading industry expert
This end-of-year review focuses on the VAT 'hot topics' of 2014 and offers a few ideas for boat buyers and sellers to consider for the next year.
Vat Status ... is this a thing of the past?
As the European Union ("EU") continues to expand with new member states, the issue of VAT status, whether during or after membership, is an ongoing question. Compliance with member states' accession conditions can have a particular effect on VAT status if not considered correctly. The evidence of VAT-paid status will typically be an invoice, illustrating the VAT element and VAT number, or may take the form of a similar tax-related or Customs document. Although, a warning should be noted in that supporting evidence of a completion statement is not direct evidence in itself. Boats sold between companies should show the VAT element on the VAT invoice. Some EU member states ask for the original invoice, but others adopt a more pragmatic approach and a certified or photocopy onboard may be adequate for primary challenge of VAT status by fiscal authorities within the EU.
Some boating related websites suggest that any queries should be referred to Her Majesty's Revenue's National Advice Line. It is often suggested that if the query is complex, a request should be sent asking for the matter to be referred to the HMRC Unit of Expertise on Yachts. But beware, this is not HMRC policy, as Units of Expertise are internal resources only for HMRC. The HMRC Advice Centres will answer frequently asked questions (FAQ's) and any more specific technical points will be sought within HMRC, but one should note that the query itself will not be referred on directly.
HMRC do not hold copies of individual VAT invoices from boat builders, dealers or other boat sales transactions it should be noted. Therefore, in the case of boats that were "self-builds" or "refits", these vessels will not have a sole 'VAT status' document. For this reason, all copies of the invoices involved in the construction should be kept and passed to subsequent owners to show 'VAT-paid status'.
Boat Data Services prides itself on its client-focused and tailor-made advice to clients. If you require any further information or confidential advice on the issue of VAT status of your craft, please do not hesitate to get in touch.
Isle of Man issues with VAT status
The Isle of Man Ship Registry was established as an international register in 1984 and since that time the size of the register has attracted a gross registered tonnage in excess of 15,000,000, consisting of around 400 merchant ships and 100 of the world’s commercial superyachts, often used for chartering. The Isle of Man Register is a component part of the British Ship Register. Ships registered with the Isle of Man flag are classified as British ships and have the right to fly the “Red Ensign”, but it should be noted that they are subject to a separate jurisdiction under the Isle of Man Ship Registry. This fact in itself causes some issues with the Customs and VAT status of a vessel.
Boat Data Services has a history of dealing with varying jurisdiction issues and is happy to help you in this area.
French Charter Vessels
On 25 June 2013, the French tax authority published an official notice confirming that VAT must be applied to yacht charters commencing in French waters. France had been notified by the European Commission that the criteria it was previously applying - allowing commercial VAT exemption to yacht charters - was not in line with European law. In compliance with the European Court of Justice ("ECJ") ruling, the exemption will no longer apply to hiring and charter operations for leisure use, either with or without a professional crew, including operating the yacht on the high seas.
Certificates of Origin for exports
When vessels are purchased with the intention of export outside the EU, the immediate concern is the zero-rating of the export, so the customer in effect pays no VAT to the EU. However, it is often the case that Customs duties of the receiving country are overlooked. As the UK Customs offices have disappeared at the borders, the task of producing the officially authenticated copies of the Certificate of Origin has fallen upon the commercial world. Pre-export or retrospective EUR documents can be obtained via Boat Data Services to assist you. Most countries accept electronic versions, although a few still require manual documents to be prepared.
If you have any questions about Certificates of Origin or export documents, please feel free to contact us for confidential advice.
Changes in Government communications
The 'gov.uk' website is being made the preferential government contact website, as a 'one-stop-shop' for all governmental departments. In the case of the boating community, the use of specific departmental websites such as HMRC are gradually being amalgamated into this one stop shop website.
In April 2014 details on sailing leisure craft to and from the UK, including reporting requirements and VAT status, have now been included in a UK Border Agency notice. A copy of this notice can be found on the Boat Data Services website and we are happy to assist with any queries you may have in the interpretation of such official notices.
HMRC campaigns for 2015/15
Changes in rules relating to vessels used by disabled / physically impaired persons:
In 2012, the VAT reliefs changed in relation to disabled persons' adapted "means of transport" relief. The extra statutory concession changes were then reflected in an HMRC notice on the subject. Supplying a new or used boat to a disabled person requires strict guidelines to be followed, which can result in the correct zero-rating of the sale. Currently, the "Dealers' Voluntary Scheme" is an exercise being run by HMRC whereby the Government is undertaking to gather information about the supply of 'adapted' boats that have been zero-rated for VAT purposes. This exercise is aimed at helping HMRC illicit information about the volume and type of boats sold, hired or leased and the level of adaptation. Help from the marine trade is being sought by the VAT Disabled Reliefs Team (HMRC), asking participants to record, collate and provide this information on a survey form for each zero-rated sale, hire or lease.
If any of the issues above affect you, please do not hesitate to contact Boat Data Services for independent and confidential advice.
General HMRC projects in place for 2015 for VAT registered businesses
In accordance with the Finance Act 2013, HMRC is permitted to obtain data on card payments to all UK businesses for the previous four years. It is understood that HMRC will soon be running a campaign commencing in 2015 to ensure that businesses are made aware of their responsibilities and are correctly VAT registered, to allow businesses to get everything in order. HMRC are thought to be looking to analyse the data obtained from third parties, cross-referencing and comparing the data with what the tax authority already holds in order to give transparency on the data obtained. The process is intended to allow HMRC to identify fraud and evasion, but these enquiries will also cover many businesses trading legally.
Boat Data Services is an innovative tax advisory service offering client-led and bespoke advice to clients. We benefit from the knowledge of 40 years within Her Majesty's Revenue and Customs working alongside the Armed Forces and international companies. Within our experience at HMRC, we proudly introduced the creation and management of the specialist area known as the Pleasurecraft Unit of Expertise. Boat Data Services are now offering tax consultation services pertaining to HMRC and VAT matters for the benefit of its clients.
We hope that the topics covered in this article have been of interest. Should you require any clarification or have any further questions, please contact us
November 2014 Boat Data Services