Brexit VAT: Your questions answered

Brexit VAT. A lot of you might have contacted us with questions on boat VAT funds on yachts which had been outdoors of the UK on the finish of the Brexit transition interval on 31 December 2020, in addition to the foundations round Returned Items Reduction (RGR).

RGR means that you can reimport your boat into the UK with out paying Customs Responsibility and VAT.

Crucially this will solely be claimed if the boat has been within the UK underneath current possession.

Initially, Her Majesty’s Income and Customs (HMRC) introduced that homeowners of boats which have been within the UK underneath current possession and had been within the EU on the finish of the Brexit transition interval, might keep away from paying a second VAT cost if the vessel returned to the UK earlier than 30 June 2022.

This utilized no matter when the boat left the UK.

The three yr situation for Returned Items Reduction for leisure boats was waived by the UK Authorities on 1 January 2022.

Which means VAT is not going to be recharged on boats that return to the UK. It solely applies to boats which were primarily based within the UK underneath their present possession, and to vessels that are the private property of a UK resident and are being returned to the UK for private use.

UK VAT continues to be liable on all boats which were purchased and saved within the EU and have by no means been within the UK underneath present possession.

Our consultants reply your Brexit VAT questions.

I purchased a ship in Eire. How will VAT-paid standing be affected if I registered the boat in Northern Eire and sailed to the UK mainland?

I’ve just lately purchased a ship in Eire that was EU VAT paid pre-Brexit.

I’ve each a UK and Irish Passport, and houses in each England and Northern Eire.

How will VAT-paid standing be affected if I had been to register the boat in Northern Eire after which sail to the UK mainland?

If my boat is registered in Northern Eire, do I’ve to sail straight from a berth in Northern Eire to the UK mainland, or can I in a single day within the Republic of Eire earlier than continuing to the UK mainland?

On this occasion, do I’ve to alert customs in each the UK and Eire to my actions, and what paperwork will I want in every case?

I’m struggling to get any recommendation on one of the simplest ways to proceed with my boat and can be very grateful for any assist/recommendation.

Brendan Melarkey

Robin Baron, chair of the Cruising Affiliation’s Rules and Technical Companies group (RATS) responds:

Brendan’s downside is difficult due to an absence of readability on the present guidelines referring to Northern Eire.

His nationality and the nation of registration of his boat are usually not related. He’s clearly a UK resident, whether or not his primary house is in England or Northern Eire.

I assume that the vessel was in Eire on thirty first December 2020 and that his current buy happened after that date.

It’s unclear whether or not Brendan has already sailed his boat from Eire to Northern Eire.

So the questions relate to Brendan’s motion of his boat from (a) Eire to Northern Eire (though this may increasingly have already taken place) (b) Northern Eire to Eire (c) Eire to Nice Britain and (d) Northern Eire to Nice Britain.

In every case Brendan must know the exit and entry necessities and the VAT remedy. I’ll take care of every voyage in flip. Brenden’s questions increase complicated authorized points and he would effectively be suggested to acquire specialist authorized recommendation.

Eire to Northern Eire

The conventional entry formalities apply to boat actions from Eire to Northern Eire (Q flag, Kind 1331, report back to Yachtline) however crew particulars are usually not wanted.

Below the Northern Eire Protocol the vessel shouldn’t be topic to UK VAT on entry to Northern Eire.

Northern Eire to Eire

The state of affairs on reporting between Northern Eire and Eire has been in a state of flux.

Nonetheless the present model (29/12/2021)  of Discover 8 “Crusing your pleasure craft to and from the UK” excludes NI to EU (and therefore Eire) from the necessity for kind 1331 reporting.

Discover 8 is at the moment being re-drafted however this provision is unlikely to alter.

When arriving in Eire the recommendation from Irish Crusing is to fly a “Q” flag as a courtesy and make contact with the closest Harbour Grasp to report your arrival – phone numbers in The Cruising Almanac, Reeds and the ICC crusing instructions.

It’s unlikely that they are going to be very .

Brendan’s vessel is EU VAT paid because it was in Eire on thirty first December 2020 so no additional cost to VAT applies.

As with all entry and exits Brendan ought to have the same old documentary proof of possession, VAT cost and placement on the thirty first December 2020.

Eire to Nice Britain

There are not any departure necessities from Eire. Upon entry into GB the traditional entry formalities apply (Q flag, Kind 1331, report back to Yachtline).

As a UK resident Brendan can’t declare Non permanent Admission and so his vessel might be liable to VAT on entry.

Northern Eire to Nice Britain

There are not any entry formalities. Nonetheless, import VAT will develop into chargeable on the motion of the yacht from Northern Eire to Nice Britain.

Presumably, Brendan would want to report this to HMRC though there are not any entry formalities for motion of yachts from Northern Eire to the UK.

It stays to be seen how this might be administered in observe.

Can a ship purchased outdoors the UK or EU be sailed within the EU and non EU international locations with out paying VAT?

I used to be studying your current article about Brexit VAT on boats and have a query that I don’t suppose has been requested earlier than.

On a non VAT paid boat constructed and purchased outdoors UK or EU, can it’s sailed in EU and/or non EU international locations with out paying VAT? (If we’re UK residents)

If we reside outdoors the UK for 12 months or longer, can we return to the UK with the boat underneath switch of residence with out having to pay UK VAT?

Tom Carlise

Robin Baron, chair of the Cruising Affiliation’s Rules and Technical Companies group (RATS) responds:

The reply to Tom’s first query is Sure. He ought to be capable of use the EU Non permanent Admission Scheme.

The principle options of the EU Non permanent Admission scheme are:

(a) The vessel should not be situated within the EU for greater than 18 months. Nonetheless, the 18 month restrict could be prolonged if the vessel is laid up and never used with an total most interval throughout which the vessel can stay within the EU of 24 months. In some international locations (e.g. France) the 6 month lay-up extension doesn’t seem like accessible.

(b) The vessel should solely be used for personal functions. Any industrial utilization of the vessel, similar to chartering the vessel, taking fee-paying crew or operating the vessel for chargeable sail-training just isn’t allowed.

(c) The vessel should be owned by a non-EU resident. The rule right here applies to residency. Following Brexit, EU-citizens that dwell within the UK would be capable of make the most of this rule in the event that they qualify as UK residents however UK residents that dwell within the EU are usually not entitled to make use of the scheme. Individuals who utilise some type of nationwide residency scheme in one of many EU international locations post-Brexit to increase the 90 days in each 180 days’ Schengen visa restrict might want to take care that, in so doing, they don’t develop into resident if in addition they need to make the most of Non permanent Admission.

The EU Non permanent Admission “clock” could be reset by finding the vessel outdoors the EU; it then turns into eligible for one more interval of Non permanent Admission.

There is no such thing as a minimal interval relevant to the interval outdoors the EU. In observe, it’s effectively established by non-EU vessels that merely spending a day or two in a non-EU port and acquiring documentary proof (similar to marina receipts) is enough.

There are indications that some EU27 states will settle for proof that the yacht has sailed outdoors EU territorial waters (e.g. via AIS tracks) however such proof might not be accepted by all such states.

In reply to Tom’s second query he ought to be capable of declare Switch of Residence reduction (which applies to pleasure craft) supplied all the next situations are met:

• he’s been resident outdoors the UK for at the least 12 consecutive months, previous to the date of transferring to Nice Britain or Northern Eire;
• he’s importing the products inside 12 months of coming to dwell within the UK
• he intends to make use of the products within the UK for a similar objective they had been used for previous to transferring

Additional data on Switch of Residence reduction is accessible right here: https://www.gov.uk/steering/transfer-of-residence-to-great-britain

Do I’ve to register that my boat is EU VAT paid?

I’ve a UK registered and constructed 1936 please crusing yacht which is UK VAT exempt as a consequence of age. I’ve owned the yacht since 2017.

In September 2020, the boat left the UK for France, the place she has been ever since.

I used to be annoyingly underneath the impression that I needed to return the yacht again to UK waters by the top of June 2022 to retain my UK VAT exempt standing.

With the brand new RGR laws which got here into impact on 1 January 2022, am I proper in considering that I’m now capable of preserve my yacht in France and select once I return it to the UK with out worrying about paying UK VAT? Does the laws imply there are not any explicit time restrictions for the yacht to should return to the UK by?

My second query is for the reason that boat was within the EU on the 31 December 2020, is it now thought-about EU VAT paid and is something required of me to register that?

Aaron Ashton

Robin Baron, chair of the Cruising Affiliation’s Rules and Technical Companies group (RATS) responds:

I can affirm that Aaron doesn’t should return his boat to the UK by 30 June 2022 so as to declare Returned Good Reduction (RGR) for UK VAT.

That is on account of the adjustments to RGR introduced by HMRC with impact from 1 January 2022 which give that for a lot of vessels the three yr time restrict for UK RGR now not applies.

Supplied the boat is for private use solely, is in the identical possession as when it left the UK and has had solely operating repairs in that point, Aaron ought to be capable of return it with out incurring a cost to UK VAT.

Because the boat was within the EU on the finish of the Transition Interval on 31 December 2020 will probably be handled as EU VAT paid.

There is no such thing as a requirement to register nor any facility to have the ability to achieve this.

As at all times all proof of a vessel’s actions and places needs to be retained together with marina and gasoline receipts and yard payments.

 

Do EU VAT paid boats have freedom of motion inside the EU?

I’m British and dwell within the UK. My yacht was inbuilt Poland in 2010 and was then delivered to Hamble within the UK and the VAT due was paid in full.

Pre-Brexit we moved the boat in 6 month hops to numerous marinas in numerous international locations all through the EU and it’s now been in Crete for about 3 years.

It has at all times been within the EU and we now have a letter from the present marina to substantiate that the boat was within the EU on 31 December 2020.

We anticipate to maneuver the boat once more to Sicily sooner or later within the close to future however solely when COVID-19 dangers have considerably decreased.

The place attainable, we’d prefer to reverse the route by which we initially bought to Greece however I’m involved that now we’d have to make use of official Ports of Entry.

On coming into Italian waters our most popular first port of name can be both Santa Maria del Leuca, on the heel of Italy, or Roccella Ionica, which is additional west; however reachable by doing an ‘over-nighter’, which we’d usually choose to not do, having solely two crew in complete.

I’m very involved that neither of those marinas is an official Port of Entry and so marvel, ought to I or shouldn’t I, be involved?

Might somebody please affirm that as a result of the boat is a VAT paid EU boat, then it has each proper to journey un-hindered between any EU ports and in addition, that it doesn’t have to verify in or out of every of the EU international locations on its journeys inside the EU?

Or, if I’m mistaken, regardless of being an EU boat, does the vessel nonetheless should check-in and out with the Port Police of every port or nation it visits and might solely arrive within the subsequent new EU nation via an official Port of Entry?

The latter can be very tough to do in observe as a result of the closest Italian Ports of Entry are a number of crusing days from our nearest ‘navigational’ entry factors into the nation.

Is there any mechanism or course of whereby we might spend a few stops in a safe port or marina, on the way in which to an official Port of Entry?

I’d additionally prefer to know if we, the crew, wanted to verify in with customs or somebody, though we’re coming from Greece.

As UK residents we might, after all, proceed to go to the boat in compliance with the 90 day rule, which permits us entry to the entire of the EU; however inside sure time constraints.

David Cumella

Robin Baron, chair of the Cruising Affiliation’s Rules and Technical Companies group (RATS) responds:

David’s boat has EU VAT paid standing because it was within the EU at 2300hrs UTC on 31 December 2020.

In precept David needs to be OK with each the boat and the folks points he raises in his query.

Nonetheless as at all times there may be the danger of officers adopting totally different interpretations at an area stage significantly in these early publish Brexit days.

David’s proposed voyage is solely inside each the EU and the Schengen zone.

Accordingly there needs to be no have to report actions of individuals inside the Schengen space nor of boats inside the EU.

For boats it’s only arrivals and departures to/from the EU and for folks it’s only arrivals and departures to/from the Schengen Zone that have to be reported.

 

If we cruise Scotland, do we now have to pay VAT on our US-registered boat?

We’ve got been contemplating transporting our US registered sailboat to the UK to sail round Scotland for just a few seasons.

Are you able to please inform us if we must pay a VAT cost so as to do that?

Randee & Jim Hurst

Robin Baron, chair of the Cruising Affiliation’s Rules and Technical Companies group (RATS) responds:

To be able to reply your query I’m going to imagine that you’re each US residents resident within the USA.

You may be entitled to import your boat into the UK with out changing into answerable for UK VAT underneath non permanent admission guidelines. The next situations apply to non permanent admission:

The vessel should not be situated within the UK for greater than 18 months. It could be attainable to agree with HMRC that any interval throughout which the vessel is laid up doesn’t depend in opposition to the 18 month interval.

The vessel should solely be used for personal functions. Any industrial utilization of the vessel, similar to chartering the vessel, taking fee-paying crew or operating the vessel for chargeable sail-training just isn’t allowed.

(c) The vessel should be owned by a non-UK resident.

There is no such thing as a minimal interval that the vessel must be outdoors the UK so as to restart the non permanent admission clock.

In your case this might be finished by a visit to the Republic of Eire, acquiring and retaining documentary proof of such journey similar to receipts.

It stays to be seen whether or not HMRC will settle for proof of a voyage outdoors UK territorial waters and again that’s merely evidenced by an AIS observe as restarting the non permanent admission clock.

Along with VAT, you have to remember that the import of yachts to the UK from the US is topic to customs tariffs.

Each the UK and the EU proceed to impose a 25% customs tariff on the import of US-origin yachts and boats into the EU and the UK.

Following the UK’s departure from the EU there was a big uncertainty on the removing of those tariffs by the UK. Nonetheless, the UK determined to retain the tariffs in the meanwhile.

I’m not conscious of how lengthy US-owned yacht could be situated within the UK on a cruising foundation earlier than it’s considered being imported and the tariff changing into payable.

If the yacht has been declared for non permanent admission for VAT functions this might strengthen the case that it’s not being completely imported and the customs tariff shouldn’t apply.

 

Is there a time restrict for boats to stay in UK waters to qualify for RGR?

My yacht is UK constructed and UK VAT paid and has been within the EU for years. I plan to return the boat to the UK to qualify for Returned Items Reduction (RGR).

How lengthy should the boat stay in UK waters to qualify for RGR earlier than with the ability to go away UK waters once more?

John Froggatt.

A spokesman for Her Majesty’s Income and Customs (HMRC) responded:
People wishing to say RGR might want to stay within the UK whereas they full all the required paperwork, and endure any inspections required by HMRC.

If liable, they may even have to pay any duties to HMRC earlier than leaving.

 

Do all British registered boats qualify for Returned Items Reduction?

I preserve my Contest 40s in Bourgenay, close to La Rochelle, France.

The boat was inbuilt Holland 25 years in the past and the unique proprietor paid VAT in Holland.

I purchased the boat in France six years in the past from her English proprietor and it has at all times remained there.

I imagine the boat has been in England, however not since I’ve owned her.

It’s a British registered vessel, and was so once I purchased it.

If I carry the boat to the UK, will I’ve to pay VAT to HMRC?

Dave Robson

Robin Baron, chair of the Cruising Affiliation’s Rules and Technical Companies group (RATS) responds:

If the boat returns to the UK at any time, UK VAT will develop into payable.

It’s because Dave can’t declare Returned Items Reduction (RGR) as a result of the boat has by no means been within the UK throughout his possession.

The UK registration of the vessel is irrelevant within the VAT context.

The best way the UK has chosen to use VAT guidelines on leisure vessels publish Brexit is manifestly unfair.

When Dave purchased the boat the worth can be set on the idea that VAT had been paid inside the EU which at the moment included the UK.

Why ought to he be anticipated to pay VAT once more?

The impact of this coverage choice is sort of actually that Dave is not going to return his boat to the UK however will preserve it and ultimately promote it within the EU, thus depriving the UK marine leisure sector of marina, boatyard and brokerage charges and HM Treasury of the associated taxes.

The Cruising Affiliation is participating with HMRC and HM Treasury to hunt to alter these arbitrary and manifestly unfair guidelines.

 

What’s the distinction between a ship and a caravan?

As I perceive it, Her Majesty’s Income and Customs (HMRC) classifies boats as industrial items, that are liable to VAT, and caravans as private possessions, which I perceive are VAT free.

For my part, that is unsuitable.

For instance, if you’re a UK resident who owns a caravan, HMRC would classify it, from a tax viewpoint, as being a ‘private possession’.

This implies you possibly can preserve it within the EU for so long as you preferred and convey it again to the UK any time you preferred, freed from any secondary VAT being charged.

Ought to HMRC not deal with boats the identical approach because it treats caravans with regards to VAT?

Nick Fletcher

An HMRC spokesperson responds:

By way of the foundations for charging import VAT there is no such thing as a distinction between a privately owned boat and a caravan.

Boats and caravans, whether or not industrial items or non-public possessions, are topic to import VAT when imported into the UK from one other customs territory except a reduction applies.

Each could be eligible for Returned Items Reduction (RGR) topic to assembly the situations of the reduction.

Stuart Carruthers, cruising supervisor of the RYA, responds:

Because the RYA understands it, there is no such thing as a distinction between caravans and boats and our steering says a lot the identical factor because the HMRC response.

What’s totally different is the way in which they might be used.

This offers rise to a lot of the misunderstanding.

For instance, a ship can enter and exit at any level on the UK shoreline whereas a caravan or motorhome is restricted to a small variety of industrial ferry ports the place there are formal border controls.

Continues under…

I’m positive boaters wouldn’t favour nominated ports of arrival and departure and due to this fact extra reporting necessities and procedures needs to be anticipated.

The RYA has lengthy been conscious that every one actions of products, together with private possessions, between the UK and the EU are handled in the identical approach as actions to and from the remainder of the world.

This implies the actions are topic to customs processes, and import duties, together with VAT, might be payable except any reduction applies.

On this case the reduction in query is Returned Items Reduction (RGR) and is accessible for any items returning to the UK, together with privately owned pleasure craft, supplied the situations outlined within the laws are met.

Nonetheless, this doesn’t handle the elemental level that HMRC is in search of to levy VAT on boats which were legitimately purchased both new or second hand and saved within the EU whereas we had been all EU residents.

We predict that is unreasonable and we’re lobbying exhausting in order that UK homeowners can repatriate their boats to the UK, even when they’ve by no means been within the UK underneath their possession and due to this fact haven’t been exported.

Below the VAT RGR guidelines, import VAT is simply relieved if the importer and the exporter are the identical individual. Consequently, reduction from import VAT just isn’t accessible.

 

Can VAT-paid standing in your boat be maintained within the UK and EU concurrently?

Can VAT-paid standing be maintained within the UK and EU concurrently? For individuals who anticipate altering domicile between EU/UK this might be very helpful, and would additionally permit a ship to be marketed to a wider market as VAT-paid.

I perceive that EU guidelines would permit for an EU resident (i.e. an agent) to ascertain VAT-paid standing for a ship owned by a resident of the UK, when it’s situated in EU waters.

Is that this true, and does the identical risk exist for EU-owned boats in UK waters (offering they had been beforehand EU VAT-paid, and have been within the UK in present possession)?

Angus Abrams

Robin Baron, chair of the Cruising Affiliation’s Rules and Technical Companies group (RATS) responds:

It could be attainable for some yachts to take pleasure in being eligible for each EU and UK VAT paid standing.

An instance of the place this might be attainable is a yacht which is situated within the EU on 31 December 2020 (retaining EU VAT-paid standing) and which has beforehand been situated within the UK.

HMRC has made clear that if the yacht is returned to the UK earlier than 30 June 2022 (or inside the 3 yr Returned Items Reduction (RGR) interval if this runs till after 30 June 2022) the yacht would then be eligible to acquire UK VAT-paid standing on return to the UK (supplied that the RGR situations are met (return inside 3 years, no change of possession or work to the vessel past operating repairs)). [NOTE: This three year RGR condition has been dropped by the UK Government on 1 January 2022]

EU VAT paid standing might then be regained if the yacht is returned to the EU inside 3 years of leaving the EU (supplied that the RGR situations proceed to be met).

Over time, will probably be a problem for a yacht to retain the good thing about each UK and EU VAT-paid standing.

The yacht might want to go to each the EU and UK on a three-year cycle in order that RGR situations are glad and there could also be declaration formalities related to EU entry for non-EU established yacht homeowners.

When the yacht is obtainable on the market the proprietor can have the benefit of a wider market of potential patrons however upon completion of the sale there’ll have to be a selection made by the client as to the vessel’s location on sale as inevitably the eligibility for VAT-paid standing in one of many territories might be misplaced.

Modifications of domicile (versus residence) are usually not related to this query.

RATS just isn’t conscious of the usage of brokers within the EU to acquire or retain EU VAT standing.

Responding to the query: Are there instances the place altering domicile from EU to UK could be thought-about as an distinctive circumstance permitting a one off switch of VAT-paid belongings between jurisdictions with out being charged VAT?

The UK has Switch of Residence reduction from VAT when transferring your everlasting place of residence to the UK. This extends to pleasure craft.

To say reduction, you will need to fulfill all the following standards:

• you’ve been resident outdoors the UK for at the least 12 consecutive months, previous to the date of transferring to the UK
• you’re importing the products inside 12 months of coming to dwell within the UK
• you plan to make use of the products within the UK for a similar objective they had been used for previous to transferring.
• The vessel will need to have been owned by you for at the least 6 months previous to its importation to the UK.

You need to apply prematurely for the reduction on kind ToR1. See: https://www.gov.uk/steering/application-for-transfer-of-residence-relief-tor1

Will my boat lose its EU VAT paid standing if it leaves the EU?

A UK registered yacht with UK VAT Paid Standing (paid in 2016) was moved to the EU earlier than 31 Dec 2020 and has proof of being within the EU on that date, and has now adopted EU VAT Paid Standing.

The vessel is being offered by its UK proprietor to a different UK proprietor, however the vessel is remaining within the EU (Greece).

If the brand new homeowners cruise solely within the EU, they’re fantastic, however they want to cruise to Turkey, Croatia or different non-EU international locations (because of the Schengnen 90-day restrict) earlier than returning to the EU (Greece), the place the boat might be saved.

• If the boat leaves the EU, will it lose its EU VAT paid standing and should pay EU VAT?
• Does it matter to the EU or to Greek authorities the place the vessel is registered (UK) with regard to VAT standing?
• Presumably, if bought with EU VAT standing, the brand new homeowners wouldn’t be eligible for Returned Items Reduction in the event that they introduced the boat to the UK, and would want to pay UK VAT?
• The earlier proprietor had a go well with of sails made for the boat within the UK. These are being given to the brand new homeowners within the UK, who will then take the sails out to the boat. Will they should pay EU VAT on the sails once they take them to the EU?

Simon Farmer

Robin Baron, chair of the Cruising Affiliation’s Rules and Technical Companies group (RATS) responds:

We’re nonetheless within the early days after Brexit. The EU, governments and officers are nonetheless coming to phrases with find out how to take care of varied conditions.

The solutions under needs to be learn topic to this basic remark.

There’s a explicit problem in Greece the place homeowners who’ve a VAT bill within the title of a earlier proprietor are encountering difficulties with establishing VAT paid standing with native officers.

The CA is at the moment addressing this downside with Greek customs officers.

If the boat leaves the EU, will it lose its EU VAT paid standing and should pay EU VAT? 
Sure. Technically upon departing Greece the vessel is exported from the EU. It must depend on the EU Returned Items Reduction guidelines (RGR) upon its return (situations: not more than three years away, no change of possession or alterations to the vessel) so as to retain EU VAT paid standing upon import.

Does it matter to the EU or to Greek authorities the place the vessel is registered (UK) with regard to VAT standing?
It shouldn’t. Submit Brexit it’s fairly doubtless that UK flagged vessels might be topic to larger scrutiny from the authorities of EU member states.

Presumably, if bought with EU VAT standing, the brand new homeowners wouldn’t be eligible for Returned Items Reduction in the event that they introduced the boat to the UK, and would want to pay UK VAT?
Sure.

 The earlier proprietor had a go well with of sails made for the boat within the UK. These are being given to the brand new homeowners within the UK, who will then take the sails out to the boat. Will they should pay EU VAT on the sails once they take them to the EU?
Technically they must pay EU VAT. This may occasionally or might not be enforced.

Have a Brexit VAT query for our consultants? Electronic mail us at [email protected] and we’ll do our greatest to reply them.

This text was up to date following the announcement that the three yr situation on Returned Items Reduction is to be dropped by the UK Authorities