Taking your boat abroad – what tax issues do you need to think about?

Mark Doherty, VAT Director, Azets
Lucy Sutcliffe, Tax Partner, Azets

Overview

Prior to Brexit on 1 January 2020, UK owners of private pleasure boats had the freedom to move and sail their boats within the EU without any material risk of double taxation. Providing the boat was EU VAT (and Duty) paid, owners were generally free to move their boats on a temporary basis around the 28 member states. (Please note that boats owned and operated for commercial purposes will be subject to different rules and so this blog focuses on privately owned boats moved to the EU. Any owners moving a boat into another non-EU country should check the local rules as these may vary.)

Brexit has meant that a hard border now exists between the UK and EU and the movement of goods across this (whether temporary or permanent) may mean that a VAT/Duty charge is triggered where goods are moved across this into Free Circulation. Owners should not assume that because VAT/Duty has previously been paid elsewhere in the EU under the old rules, that subsequent tax charges will never arise.

Moving boats into the EU

Following the Covid pandemic, it seems increasingly likely that UK owners will now wish to move their UK VAT paid boats into the EU. It is worth remembering that Norway, Switzerland, the Channel Islands, the Canaries, Ceuta, and Melilla are not part of the EU.

VAT/Customs Duty

If a second VAT/Duty charge is to be avoided on the movement into the EU, then this must be done under the Temporary Admission (“TA”) rules which exist in the EU and UK to avoid a VAT/Duty charge. Under the EU TA regime, the owner can typically keep the boat in the EU for up to 18- months, with a possible further six-month extension, if required, before VAT/Duty becomes payable.

Most countries of entry will issue a Transit Log to be kept with the vessel while it is in that country, and this must be stamped on leaving and a new one obtained at the next EU country’s port of entry. The boat’s TA timeframe can be ‘restarted’ by exiting the EU with the vessel, obtaining the required proof of leaving (normally at the marina) and then re-entering the EU. This could potentially be as soon as 24 hours later.

The boat will need to be a UK-registered boat, owned by a person resident in the UK or other non-EU country. There may also be local reporting requirements for notifying the arrival of your boat in an EU port and declaring certain items such as prohibited items and Duty Free stores etc.

Any decision to keep the boat permanently in the EU or to sell the vessel once there will potentially trigger an EU Duty/Import VAT charge and further advice should be taken on this should it arise.

You may also need to consider declaring other items on board. These may include items such as restricted goods including certain foodstuffs, tobacco products, alcohol more than your personal allowance, any goods which may have been acquired outside the UK where the total value of these goods exceeds £270, subject to certain conditions. The application of additional import costs may also include any equipment which you may have bought and had fitted to the boat outside the UK.

Movement of people

UK boat owners also need to be aware that another limiting factor comes into play here – UK residents no longer enjoy free movement through the EU. Visits to the ‘Schengen’ area are limited to 90 days in every 180 days. UK owners wishing to spend longer periods on board will need to develop strategies to stay within these limits. This may potentially be managed by taking the boat outside the EU temporarily or simply planning shorter cruises or leaving the boat in the EU while you return to the UK.

Moving boats into the UK

VAT/Customs Duty

EU residents wishing to move EU-registered and VAT paid boats into the UK should be able to use the UK’s own Temporary Admission regime.

Any decision to keep the boat permanently in the UK or to sell the vessel here will potentially trigger a UK Duty/Import VAT charge and further advice should be taken on this should it arise. There are specific local reporting requirements for notifying the arrival of your boat in the UK and declaring certain items such as prohibited items and Duty Free stores etc.

Movement of people

Most EU citizens will be able to visit the UK for up to six months either with no Visa requirements or under a Standard Visa. Visitors should check their specific circumstances on the government website as these may be subject to change.

For any questions or further details, please contact us.

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