HMRC have just announced their new tactics against their favourite topic of yachts. The new tactics effectively try to attack those who believe they have already managed to jump through the loops and had their VAT Registration (and subsequent input VAT recovery paid) all agreed. They will attack anything they consider as abusive, such as:
(The existence of one or more of the following features might indicate an abusive structure (the list is not exhaustive - the indicators are illustrative of the points that we might take into account, together with others):
· The main user of a pleasure craft is the ultimate owner of the chartering or leasing entity.
· The main user of a pleasure craft funded the purchase of the vessel (directly or indirectly).
· The person who funded the purchase of a pleasure craft (directly or indirectly) uses the vessel for prolonged periods in the peak chartering season.
· The chartering of a pleasure craft to third parties would not, alone, be of sufficient continuity and substance to comprise an economic activity.
· The chartering or leasing entity shows significant ongoing losses in its financial statements.
· Charter fees or lease instalments due from the main user of a pleasure craft are paper transactions only (for example being offset against loans).
· Charter fees or lease instalments are below open market value.
The terms of a lease differ significantly from normal commercial practice (for example, the duration of the lease is unusually long).
If you are off the boat show in Southampton in the next couple of weeks then you may want to rethink your plans now before you find significant penalties (HMRC have to reclaim the revenue lost through Fleming claims somehow!) as well as interest an input VAT to be repaid.
Tuesday, September 1, 2009
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VAT due on a yacht?
ReplyDeleteZaenia hi - Is it normal to get wrong/conflicting and just plain obstructive buck passing when asking a VAT question to HMRC, HMRC written enquiries and the UoE (Unit of Expertise or Excellence) on Pleasure Craft. Am at wit's end and can't decide whether they're stupid or pigheaded or both. Where do they find these people? Am asking a question about whether a boat I'm being sold as 'VAT paid' has or has not lost its VAT status through a chargeable event. The first 2 HMRC advice line staff I talked to thought a chargeable event was something that happened at a bull fight...... (I'm kidding, they just didn't know; I added the bull fight to make them more interesting). Sigh.......Boat built '89, taken to France for charter so no vat. Then did have VAT paid, was sold in France to Jersey resident who took boat out there in 95. While in Jersey, he made improvements to the boat that increased the value. For 7 years boat was based in Jersey, sailing regularly into UK and French waters. In 2001 he changed boat reg from Ipswich UK part 1 to Jersey Part 1. In 2002 he sailed back to France. In 2005, he sold the boat in France to a UK resident. At no time did he make any import/export declaration.
The way I understand it, the boat could have, sailing regularly in and out of France and UK have been coming in and out under TI but - the work done that increased the value in Jersey rules out eligibility for RGR and in any case boat was 'homed' out of EU waters for 7 years. I believe boat, in the absence of any declaration out of, or into EU waters was deemed under TI when sailed back into France in 2002. Boat was then Jersey reg, home port Jersey, owend by Jersey resident so TI is logical. Chargeable event happened when Brit bought her ex France. From that moment, boat owed VAT. Seller insists that HMRC have 'told him' VAT status is fine (yeah, for them.......). I have asked the UoE for boat's VAT status, telling then whole history and they have first told me to ask the Greeks (where the boat is now) and then said, after I told them Greeks have nothing to do with it since boat came back into France, that they cannot deal with 'hypothetical' questions. This when, to make it 'easier' for them, I asked whether HMRC would believe boat's status to be TI if boat had come back into the UK from Jersey. Am at wit's end - are they stonewalling because they're just bloody minded or because they actually don't know??????????????????? Had to have rant............... Thanks for reading and if you have any comment, I'd love to know it:) All the best,
I understand just how frustrating it can be to try to get an answer out of HMRC!
ReplyDeleteThis is a highly complicated area of VAT, with a complicated hsitory in your case. However, the basic answer to your query is to be found in Customs Notice 8, para.6.4 on their website.
If you would like to discuss the matter in depth then please do call me direct and I can discuss our fee levels with you.