Buying a boat – what you need to know about VAT and Customs
Mark Doherty, VAT Director, Azets
Lucy Sutcliffe, Tax Partner, Azets
Overview
The decision to buy a new boat is always an exciting one, whether that’s a luxury RIB, motor boat or sailing yacht, but it is important to understand any issues of tax which may be associated with the purchase or transfer.
As a ‘moveable’ asset, the tax rules can be complicated as these often differ between different countries – and Brexit has added another layer of complexity.
VAT and Customs Duty will often be the two main areas of difficulty and some owners have already accidentally triggered a double VAT charge on their boats when moving them between the UK and EU.
When buying a boat, it is important that the owner has a strategy for managing the potential tax risks/issues, although the new owner may, to a degree, need to engage in some ‘crystal ball gazing’.
The VAT/Duty analysis can depend upon a range of factors, including where the buyer belongs, where the boat is located, whether it is sold under a Margin Scheme and whether the owner buys through a business.
VAT
The starting point is that VAT will typically be payable by the owner at the local rate in the country of purchase. Where boats are bought ‘VAT paid’ in the EU by an EU-based person/business, then the ‘VAT paid’ status applies for all EU countries and the boat can normally be moved around freely, providing evidence of VAT paid status can be produced.
Where a vessel is bought and moored in the UK, then UK VAT will be payable at 20%. Both the UK and EU operate a Second Hand Margin Scheme for second hand boats and this should help reduce the amount of VAT payable by any private owners to the vendor.
Any EU/UK VAT paid will not normally be reclaimable by a private purchaser but where the boat is used in whole/part for a ‘VATable’ commercial purpose, such as third party leasing or providing other leisure services, then the VAT paid may be recoverable via a local VAT registration.
There are a number of business structures in this area which may be suitable in some circumstances to render the VAT paid reclaimable, but specific advice will need to be taken in the relevant country. These structures are only likely to be suitable for larger vessels as there will be additional costs attached.
Customs Duty
UK/EU Customs Duty will not be payable directly by the purchaser, unless the boat is ‘imported’ into another country.
Moving boats between the UK and EU
Owners should be aware that the UK and EU have not completely ‘joined-up’ their respective VAT rules for pleasure boats following Brexit – and owners should not assume that having paid VAT in one territory will not result in VAT (or indeed Duty) being paid in another country later on.
Where new vessels are sold in the UK or EU and then permanently exported, then local VAT should not be chargeable, but import VAT (and possibly Duty) will typically be payable in the destination country.
The rules are far more complex, however, where UK-based boats are temporarily moved into the EU and vice versa for a season, holiday or repair etc and this is covered.
For any queries or for more information, please contact us.
Guiding you on your journey
At Cobra RIBs, our boat experts and enthusiasts are here to support you with whatever queries you may have. If you’re interested in acquiring your very own RIB but need a little advice, get in touch today.