Yachting Monthly experts help you unravel the new regulations in relation to the thorny issue of VAT following the end of the Brexit transition period

Brexit VAT. Many of you have contacted us with questions about boat VAT payments on yachts which were outside of the UK at the end of the Brexit transition period on 31 December 2020, as well as the rules around Returned Goods Relief (RGR).

RGR allows you to reimport your boat into the UK without paying Customs Duty and VAT.

Crucially this can only be claimed if the boat has been in the UK under present ownership.

Initially, Her Majesty’s Revenue and Customs (HMRC) announced that owners of boats which have been in the UK under present ownership and were in the EU at the end of the Brexit transition period, could avoid paying a second VAT payment if the vessel returned to the UK before 30 June 2022.

This applied regardless of when the boat left the UK.

The three year condition for Returned Goods Relief for recreational boats was waived by the UK Government on 1 January 2022.

This means that VAT will not be recharged on boats that return to the UK. It only applies to boats that have been based in the UK under their current ownership, and to vessels which are the personal property of a UK resident and are being returned to the UK for personal use.

UK VAT is still liable on all boats that have been bought and kept in the EU and have never been in the UK under current ownership.

Our experts answer your Brexit VAT questions.

My ketch was lying in the UK at the end of the transition period. I now want to move it to France. Will I be able to claim RGR?

Brexit VAT Sailors with French residency who have a Withdrawal Agreement Residence Permit (WARP) are not allowed to temporary import their boat, as it is not available to EU residents. Credit: Graham Snook/Yachting Monthly

Sailors with French residency who have a Withdrawal Agreement Residence Permit (WARP) are not allowed to temporary import their boat, as it is not available to EU residents. Credit: Graham Snook/Yachting Monthly

I have a ketch, built in 1976 and first registered in Germany.

It was sold in 1999 in Spain to a Dutch owner who, according to the receipt paid VAT on the purchase, and registered the boat in Holland.

I have copies of this certificate. I bought the boat from him, also in Spain, in 2004 (I have the bill of sale) and put it on the UK SSR.

Unfortunately, it was lying in the UK on 01/01/2021. This was as a result of the 2020 COVID-19 restrictions that prevented completion of repairs and sailing back to the EU as planned in the summer of 2020.

The marina, like most others, was closed for part of that year and travel throughout 2021 was disrupted. I hope that these count as ‘special circumstances’.

I have lived in France since 2011 and have French residency (a WARP – Withdrawal Agreement Residence Permit) and would like to have the boat here.

Reading your responses to other questions and other information on the internet, am I correct in believing that:

  1. As a WARP I am not allowed to temporarily import the boat into France for 18 months?
  2. I may be eligible for RGR on permanent importation back into the EU (a note from Brussels indicates this) – if so, how do I go about claiming it?
  3. The boat may be counted as a personal possession as I’ve moved residency from the UK to France – if so how do I claim this?
  4. Should there be no alternative but to pay VAT again, how and where is the boat valued for the purpose of this? Are there specified French ports?
  5. And non-VAT points related to this problem; am I correct in thinking that as I’m no longer resident in the UK, I can’t continue on the SSR?
  6. Because I have French residency, not citizenship, I am not entitled to French yacht registration?
  7. the suggestion that I could buy a French boat and simply re-register it here in my name is wrong?
  8. Would a solution be a Polish flag?

Jeremy Woolley

Robin Baron, chair of the Cruising Association’s Regulations and Technical Services group (RATS) responds:

Jeremy has an EU VAT paid boat that was in the UK at 2300 UTC on 31 December 2020. He is resident in France and so resident in the EU.

Robin Baron, chair of the CA's RATS group

Robin Baron is chair of the Cruising Association’s Regulations and Technical Services group. Credit: Robin Baron

Jeremy’s ketch was built in 1976. Yachts built before 1 January 1985 were deemed to have acquired EU VAT paid status if they were in private ownership and within the EU at midnight on 31 December 1992. Proof of this may be required by local customs.

If documentary evidence of the location of the vessel on 31 December 1992 is not available he should provide whatever documents he has so that the local customs may form a view as to the location of the boat based on these documents.

As with yachts built after 1985, an original invoice showing VAT payment to an EU authority is the preferred evidence of VAT payment (if it is still available).

Once in “free circulation” a yacht built before 1 January 1985 is treated as any other boat in connection with the Brexit related changes in VAT status arising from location on 31 December 2020.

The EU Commission approach is that if a boat was located in the UK (except Northern Ireland) at the end of the Transition Period it will have lost its EU Union (VAT-paid) status and became non-Union goods as from 1 January 2021.

However, Union status may be recovered through the Returned Goods Relief 3 year rule (RGR) if it can be demonstrated that the yacht had been taken from the EU27 to the UK at some point before the end of the Transition Period and is then returned to the EU after the end of the Transition Period, provided that the conditions for RGR are satisfied on the entry to the EU (see next paragraph).

For RGR to be available:
(a) the vessel must not have had more than “running repairs” to it during its period of export that do not increase its value;
(b) the goods must be returned to the EU within 3 years or, if they are returned outside the 3 year period, there are “special circumstances” to justify the waiver of the 3 year requirement; and
(c) the person importing the goods is the person who originally exported them.

If a return is made outside the 3 year period the requirement for “special circumstances” is assessed on a country by country basis. Jeremy’s ketch was last in the EU27 in 2018. To claim RGR successfully he needs “Special circumstances” to apply.

In order for EU RGR to be claimed a declaration claiming RGR needs to be made by to the relevant national tax authorities of the country of entry on each entry of a yacht into the EU from a location outside the EU. In general EU customs declarations must be made by a person established in the EU but declarations can also be made by person that are not established in the EU as long as the declaration is “occasional and the customs authorities consider it to be justified”. There is no indication of what is judged “occasional”.

In practice, it remains to be seen what level of formality will be required for applications for EU RGR. At the current time, the practicalities of the entry requirements when EU RGR is claimed are still unclear and these may well vary from country to country.

Clearly, at the very least, the key issue will be for a yacht owner to be able to demonstrate RGR compliance if challenged. It will be important for the yacht owner to keep very clear records and evidence of dates of when the yacht left and re-entered the EU if RGR is claimed for a yacht.

Having set out the relevant rules my responses to Jeremy’s questions are as follows:

  1. As a WARP I am not allowed to temporarily import the boat into France for 18 months?
    Correct. EU Temporary admission is not available to EU residents.
  2. I may be eligible for RGR on permanent importation back into the EU (a note from Brussels indicates this) – if so, how do I go about claiming it?
    See above.
  3. The boat may be counted as a personal possession as I’ve moved residency from the UK to France – if so how do I claim this?
    Possibly. See: https://www.douane.gouv.fr/fiche/transferring-your-primary-residence-france. Note the requirement that you must transfer your property to France within 12 months of your transfer of residence.
  4. Should there be no alternative but to pay VAT again, how and where is the boat valued for the purpose of this? Are there specified French ports? The Douanes will be able to supply this information. A discussion with them prior to importation would be worthwhile.
  5. And non-VAT points related to this problem; am I correct in thinking that: as I’m no longer resident in the UK, I can’t continue on the SSR? Correct. SSR is only available to those ordinarily resident in the UK. Part 1 registration is available to British citizens but is significantly more expensive.
  6. Because I have French residency, not citizenship, I am not entitled to French yacht registration? That appears to be the case. You’ll need to discuss this with the French authorities or a vessel registration agent.
  7. The suggestion that I could buy a French boat and simply re-register it here in my name is wrong.? Yes if you don’t meet the French registration requirements.
  8. Would a solution be a Polish flag? Possibly. It would give you an EU registration. Note that French law appears to require French residents to register their vessel in France and not in other EU jurisdictions.  French registration, if it can achieved, will entail compliance with French maritime requirements including safety equipment. Jeremy should note that vessel registration is unlikely to assist with the VAT treatment of his ketch.

 

I bought a boat in Ireland. How will VAT-paid status be affected if I registered the boat in Northern Ireland and sailed to the UK mainland?

Boats belonging to UK residents which were in Ireland at the end of the Brexit transition period will be liable to VAT on entry to the UK. Credit: Graham Snook/Yachting Monthly

Boats belonging to UK residents which were in Ireland at the end of the Brexit transition period will be liable to VAT on entry to the UK. Credit: Graham Snook/Yachting Monthly

I have recently bought a boat in Ireland that was EU VAT paid pre-Brexit.

I have both a UK and Irish Passport, and homes in both England and Northern Ireland.

How will VAT-paid status be affected if I were to register the boat in Northern Ireland and then sail to the UK mainland?

If my boat is registered in Northern Ireland, do I have to sail directly from a berth in Northern Ireland to the UK mainland, or can I overnight in the Republic of Ireland before proceeding to the UK mainland?

In this instance, do I have to alert customs in both the UK and Ireland to my movements, and what paperwork will I need in each case?

I am struggling to get any advice on the best way to proceed with my boat and would be very grateful for any help/advice.

Brendan Melarkey

Robin Baron, chair of the Cruising Association’s Regulations and Technical Services group (RATS) responds:

Brendan’s problem is tricky because of a lack of clarity on the current rules relating to Northern Ireland.

Robin Baron, chair of the CA's RATS group

Robin Baron is chair of the Cruising Association’s Regulations and Technical Services group. Credit: Robin Baron

His nationality and the country of registration of his boat are not relevant. He is clearly a UK resident, whether his main home is in England or Northern Ireland.

I assume that the vessel was in Ireland on 31st December 2020 and that his recent purchase took place after that date.

It is unclear whether Brendan has already sailed his boat from Ireland to Northern Ireland.

So the questions relate to Brendan’s movement of his boat from (a) Ireland to Northern Ireland (although this may have already taken place) (b) Northern Ireland to Ireland (c) Ireland to Great Britain and (d) Northern Ireland to Great Britain.

In each case Brendan needs to know the exit and entry requirements and the VAT treatment. I will deal with each voyage in turn. Brenden’s questions raise complex legal issues and he would well be advised to obtain specialist legal advice.

Ireland to Northern Ireland

The normal entry formalities apply to boat movements from Ireland to Northern Ireland (Q flag, Form 1331, report to Yachtline) but crew details are not needed.

Under the Northern Ireland Protocol the vessel should not be subject to UK VAT on entry to Northern Ireland.

Northern Ireland to Ireland

The situation on reporting between Northern Ireland and Ireland has been in a state of flux.

However the current version (29/12/2021)  of Notice 8 “Sailing your pleasure craft to and from the UK” excludes NI to EU (and hence Ireland) from the need for form 1331 reporting.

Notice 8 is currently being re-drafted but this provision is unlikely to change.

When arriving in Ireland the advice from Irish Sailing is to fly a “Q” flag as a courtesy and contact the nearest Harbour Master to report your arrival – telephone numbers in The Cruising Almanac, Reeds and the ICC sailing directions.

It is unlikely that they will be very interested.

Brendan’s vessel is EU VAT paid as it was in Ireland on 31st December 2020 so no further charge to VAT applies.

As with all entry and exits Brendan should have the usual documentary proof of ownership, VAT payment and location on the 31st December 2020.

Ireland to Great Britain

There are no departure requirements from Ireland. Upon entry into GB the normal entry formalities apply (Q flag, Form 1331, report to Yachtline).

As a UK resident Brendan cannot claim Temporary Admission and so his vessel will be liable to VAT on entry.

Northern Ireland to Great Britain

There are no entry formalities. However, import VAT will become chargeable on the movement of the yacht from Northern Ireland to Great Britain.

Presumably, Brendan would need to report this to HMRC even though there are no entry formalities for movement of yachts from Northern Ireland to the UK.

It remains to be seen how this will be administered in practice.

 

Can a boat bought outside the UK or EU be sailed in the EU and non EU countries without paying VAT?

Brexit VAT: Owners of boats built and bought outside of the EU can use the EU Temporary Admission Scheme to cruise the EU without paying VAT. Credit: Graham Snook/Yachting Monthly

Owners of boats built and bought outside of the EU can use the EU Temporary Admission Scheme to cruise the EU without paying VAT. Credit: Graham Snook/Yachting Monthly

I was reading your recent article about Brexit VAT on boats and have a question that I don’t think has been asked before.

On a non VAT paid boat built and bought outside UK or EU, can it be sailed in EU and/or non EU countries without paying VAT? (If we are UK residents)

If we reside outside the UK for 12 months or longer, can we return to the UK with the boat under transfer of residence without having to pay UK VAT?

Tom Carlisle

Robin Baron, chair of the Cruising Association’s Regulations and Technical Services group (RATS) responds:

The answer to Tom’s first question is Yes. He should be able to use the EU Temporary Admission Scheme.

The main features of the EU Temporary Admission scheme are:

(a) The vessel must not be located in the EU for more than 18 months. However, the 18 month limit can be extended if the vessel is laid up and not used with an overall maximum period during which the vessel can remain in the EU of 24 months. In some countries (e.g. France) the 6 month lay-up extension does not appear to be available.

(b) The vessel must only be used for private purposes. Any commercial usage of the vessel, such as chartering the vessel, taking fee-paying crew or running the vessel for chargeable sail-training is not allowed.

(c) The vessel must be owned by a non-EU resident. The rule here applies to residency. Following Brexit, EU-citizens that live in the UK would be able to take advantage of this rule if they qualify as UK residents but UK citizens that live in the EU are not entitled to use the scheme. People who utilise some form of national residency scheme in one of the EU countries post-Brexit to extend the 90 days in every 180 days’ Schengen visa limit will need to take care that, in so doing, they do not become resident if they also want to take advantage of Temporary Admission.

The EU Temporary Admission “clock” can be reset by locating the vessel outside the EU; it then becomes eligible for another period of Temporary Admission.

Robin Baron, chair of the CA's RATS group

Robin Baron is chair of the Cruising Association’s Regulations and Technical Services group. Credit: Robin Baron

There is no minimum period applicable to the period outside the EU. In practice, it is well established by non-EU vessels that simply spending a day or two in a non-EU port and obtaining documentary evidence (such as marina receipts) is sufficient.

There are indications that some EU27 states will accept evidence that the yacht has sailed outside EU territorial waters (e.g. through AIS tracks) but such evidence may not be accepted by all such states.

In answer to Tom’s second question he should be able to claim Transfer of Residence relief (which applies to pleasure craft) provided all the following conditions are met:

  • he’s been resident outside the UK for at least 12 consecutive months, prior to the date of moving to Great Britain or Northern Ireland;
  • he’s importing the goods within 12 months of coming to live in the UK
  • he intends to use the goods in the UK for the same purpose they were used for prior to moving

Further information on Transfer of Residence relief is available here: https://www.gov.uk/guidance/transfer-of-residence-to-great-britain

 

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

There is no requirement to register your boat as EU VAT paid

There is no requirement to register your boat as EU VAT paid

I have a UK registered and built 1936 please sailing yacht which is UK VAT exempt due to age. I’ve owned the yacht since 2017.

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

I was annoyingly under the impression that I had to return the yacht back to UK waters by the end of June 2022 to retain my UK VAT exempt status.

With the new RGR legislation which came into effect on 1 January 2022, am I right in thinking that I am now able to keep my yacht in France and choose when I return it to the UK without worrying about paying UK VAT? Does the legislation mean there are no particular time restrictions for the yacht to have to return to the UK by?

My second question is since the boat was in the EU on the 31 December 2020, is it now considered EU VAT paid and is anything required of me to register that?

Aaron Ashton

Robin Baron, chair of the Cruising Association’s Regulations and Technical Services group (RATS) responds:

I can confirm that Aaron does not have to return his boat to the UK by 30 June 2022 in order to claim Returned Good Relief (RGR) for UK VAT.

Robin Baron, chair of the CA's RATS group

Robin Baron is chair of the Cruising Association’s Regulations and Technical Services group. Credit: Robin Baron

This is as a result of the changes to RGR announced by HMRC with effect from 1 January 2022 which provide that for many vessels the three year time limit for UK RGR no longer applies.

Provided the boat is for personal use only, is in the same ownership as when it left the UK and has had only running repairs in that time, Aaron should be able to return it without incurring a charge to UK VAT.

As the boat was in the EU at the end of the Transition Period on 31 December 2020 it will be treated as EU VAT paid.

There is no requirement to register nor any facility to be able to do so.

As always all evidence of a vessel’s movements and locations should be retained including marina and fuel receipts and yard bills.

 

Do EU VAT paid boats have freedom of movement within the EU?

 EU VAT paid boats should not need to report movements within the EU


EU VAT paid boats should not need to report movements within the EU

I am British and live in the UK. My yacht was built in Poland in 2010 and was then delivered to Hamble in the UK and the VAT due was paid in full.

Pre-Brexit we moved the boat in 6 month hops to various marinas in different countries throughout the EU and it’s now been in Crete for about 3 years.

It has always been in the EU and we have a letter from the current marina to confirm that the boat was in the EU on 31 December 2020.

We expect to move the boat again to Sicily at some point in the near future but only when COVID-19 risks have substantially decreased.

Where possible, we’d like to reverse the route by which we originally got to Greece but I’m concerned that now we might have to use official Ports of Entry.

On entering Italian waters our preferred first port of call would be either Santa Maria del Leuca, on the heel of Italy, or Roccella Ionica, which is further west; but reachable by doing an ‘over-nighter’, which we’d generally prefer not to do, having only two crew in total.

I am very concerned that neither of these marinas is an official Port of Entry and so wonder, should I or shouldn’t I, be concerned?

Could someone please confirm that because the boat is a VAT paid EU boat, then it has every right to travel un-hindered between any EU ports and also, that it doesn’t need to check in or out of each of the EU countries on its journeys within the EU?

Or, if I’m mistaken, despite being an EU boat, does the vessel still have to check-in and out with the Port Police of each port or country it visits and can only arrive in the next new EU country through an official Port of Entry?

The latter would be very difficult to do in practice because the nearest Italian Ports of Entry are several sailing days from our nearest ‘navigational’ entry points into the country.

Is there any mechanism or process whereby we could spend a couple of stops in a secure port or marina, on the way to an official Port of Entry?

I’d also like to know if we, the crew, needed to check in with customs or someone, although we are coming from Greece.

As UK residents we would, of course, continue to visit the boat in compliance with the 90 day rule, which allows us access to the whole of the EU; but within certain time constraints.

David Cumella

Robin Baron, chair of the Cruising Association’s Regulations and Technical Services group (RATS) responds:

Robin Baron, chair of the CA's RATS group

Robin Baron is chair of the Cruising Association’s Regulations and Technical Services group. Credit: Robin Baron

David’s boat has EU VAT paid status as it was in the EU at 2300hrs UTC on 31 December 2020.

In principle David should be OK with both the boat and the people issues he raises in his question.

However as always there is the risk of officials adopting different interpretations at a local level particularly in these early post Brexit days.

David’s proposed voyage is entirely within both the EU and the Schengen zone.

Accordingly there should be no need to report movements of people within the Schengen area nor of boats within the EU.

For boats it is only arrivals and departures to/from the EU and for people it is only arrivals and departures to/from the Schengen Zone that need to be reported.

 

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

Non UK residents are entitled to temporarily import their boat into the UK without becoming liable for UK VAT, but conditions apply

Non UK residents are entitled to temporarily import their boat into the UK without becoming liable for UK VAT, but conditions apply

We have been considering transporting our US registered sailboat to the UK to sail around Scotland for a few seasons.

Can you please tell us if we would have to pay a VAT charge in order to do this?

Randee & Jim Hurst

Robin Baron, chair of the Cruising Association’s Regulations and Technical Services group (RATS) responds:

In order to answer your question I’m going to assume that you are both US citizens resident in the USA.

You will be entitled to import your boat into the UK without becoming liable for UK VAT under temporary admission rules. The following conditions apply to temporary admission:

The vessel must not be located in the UK for more than 18 months. It may be possible to agree with HMRC that any period during which the vessel is laid up does not count against the 18 month period.

The vessel must only be used for private purposes. Any commercial usage of the vessel, such as chartering the vessel, taking fee-paying crew or running the vessel for chargeable sail-training is not allowed.

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

There is no minimum period that the vessel has to be outside the UK in order to restart the temporary admission clock.

Robin Baron, chair of the CA's RATS group

Robin Baron is chair of the Cruising Association’s Regulations and Technical Services group. Credit: Robin Baron

In your case this could be done by a trip to the Republic of Ireland, obtaining and retaining documentary evidence of such trip such as receipts.

It remains to be seen whether HMRC will accept evidence of a voyage outside UK territorial waters and back that is merely evidenced by an AIS track as restarting the temporary admission clock.

In addition to VAT, you need to be aware that the import of yachts to the UK from the US is subject to customs tariffs.

Both the UK and the EU continue 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 significant uncertainty on the removal of these tariffs by the UK. However, the UK decided to retain the tariffs for the time being.

I am not aware of how long US-owned yacht can be located in the UK on a cruising basis before it is regarded as being imported and the tariff becoming payable.

If the yacht has been declared for temporary admission for VAT purposes this would strengthen the case that it is not being permanently imported and the customs tariff should not apply.

 

Is there a time limit for boats to remain in UK waters to qualify for RGR?

Brexit VAT Boats moored in the harbour. (Photo by: Boat owners must remain in UK waters while claiming RGR and can’t leave until all of the paperwork is complete, and any dues have been paid

Boat owners must remain in UK waters while claiming RGR and can’t leave until all of the paperwork is complete, and any dues have been paid. Credit: Getty

My yacht is UK built and UK VAT paid and has been in the EU for years. I plan to return the boat to the UK to qualify for Returned Goods Relief (RGR).

How long must the boat remain in UK waters to qualify for RGR before being able to leave UK waters again?

John Froggatt.

A spokesman for Her Majesty’s Revenue and Customs (HMRC) responded:
Individuals wishing to claim RGR will need to remain in the UK while they complete all the necessary paperwork, and undergo any inspections required by HMRC.

If liable, they will also need to pay any duties to HMRC before leaving.

 

Do all British registered boats qualify for Returned Goods Relief?

Boats kept in the EU, including Bourgenay, France, will not be eligible for RGR if they have never been in the UK during current ownership. Credit: Getty

Boats kept in the EU, including Bourgenay, France, will not be eligible for RGR if they have never been in the UK during current ownership. Credit: Getty

I keep my Contest 40s in Bourgenay, near La Rochelle, France.

The boat was built in Holland 25 years ago and the original owner paid VAT in Holland.

I bought the boat in France six years ago from her English owner and it has always remained there.

I believe the boat has been in England, but not since I’ve owned her.

It is a British registered vessel, and was so when I bought it.

If I bring the boat to the UK, will I have to pay VAT to HMRC?

Dave Robson

Robin Baron, chair of the Cruising Association’s Regulations and Technical Services group (RATS) responds:

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

Robin Baron, chair of the CA's RATS group

Robin Baron is chair of the Cruising Association’s Regulations and Technical Services group. Credit: Robin Baron

This is because Dave cannot claim Returned Goods Relief (RGR) because the boat has never been in the UK during his ownership.

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

The way the UK has chosen to apply VAT rules on leisure vessels post Brexit is manifestly unfair.

When Dave bought the boat the price would be set on the basis that VAT had been paid within the EU which at that time included the UK.

Why should he be expected to pay VAT again?

The effect of this policy decision is almost certainly that Dave will not return his boat to the UK but will keep it and eventually sell it in the EU, thus depriving the UK marine leisure sector of marina, boatyard and brokerage fees and HM Treasury of the related taxes.

The Cruising Association is engaging with HMRC and HM Treasury to seek to change these arbitrary and manifestly unfair rules.

 

What’s the difference between a boat and a caravan?

In VAT terms, yachts, caravans and motorhomes are all treated the same way when it comes to importation. Credit: David Chapman/Alamy

In VAT terms, yachts, caravans and motorhomes are all treated the same way when it comes to importation. Credit: David Chapman/Alamy

As I understand it, Her Majesty’s Revenue and Customs (HMRC) classifies boats as commercial goods, which are liable to VAT, and caravans as personal possessions, which I understand are VAT free.

In my view, this is wrong.

For example, if you are a UK resident who owns a caravan, HMRC would classify it, from a tax point of view, as being a ‘personal possession’.

This means you could keep it in the EU for as long as you liked and bring it back to the UK any time you liked, free of any secondary VAT being charged.

Should HMRC not treat boats the same way as it treats caravans when it comes to VAT?

Nick Fletcher

An HMRC spokesperson responds:

In terms of the rules for charging import VAT there is no difference between a privately owned boat and a caravan.

Boats and caravans, whether commercial goods or private possessions, are subject to import VAT when imported into the UK from another customs territory unless a relief applies.

Both can be eligible for Returned Goods Relief (RGR) subject to meeting the conditions of the relief.

Stuart Carruthers, cruising manager of the RYA, responds:

As the RYA understands it, there is no difference between caravans and boats and our guidance says much the same thing as the HMRC response.

What is different is the way they may be used.

This gives rise to much of the misunderstanding.

For example, a boat can enter and exit at any point on the UK coastline whereas a caravan or motorhome is limited to a small number of commercial ferry ports where there are formal border controls.

Continues below…

I am sure boaters would not favour nominated ports of arrival and departure and therefore additional reporting requirements and procedures should be expected.

The RYA has long been aware that all movements of goods, including personal possessions, between the UK and the EU are treated in the same way as movements to and from the rest of the world.

RYA cruising manager Stuart Carruthers

Stuart Carruthers joined the RYA in 2005 and is their cruising manager

This means the movements are subject to customs processes, and import duties, including VAT, will be payable unless any relief applies.

In this case the relief in question is Returned Goods Relief (RGR) and is available for any goods returning to the UK, including privately owned pleasure craft, provided the conditions outlined in the legislation are met.

However, this does not address the fundamental point that HMRC is seeking to levy VAT on boats that have been legitimately bought either new or second hand and kept in the EU while we were all EU citizens.

We think this is unreasonable and we are lobbying hard so that UK owners can repatriate their boats to the UK, even if they have never been in the UK under their ownership and therefore have not been exported.

Under the VAT RGR rules, import VAT is only relieved if the importer and the exporter are the same person. Consequently, relief from import VAT is not available.

 

Can VAT-paid status on your boat be maintained in the UK and EU simultaneously?

A boat sailing off the coast of Spain

A yacht which was located in the EU on 31 December 2020 and retained its EU VAT-paid status and has previously been located in the UK may be eligible for both EU and UK VAT paid status. Credit: Graham Snook/Yachting Monthly

Can VAT-paid status be maintained in the UK and EU simultaneously? For those who anticipate changing domicile between EU/UK this could be very useful, and would also allow a boat to be marketed to a wider market as VAT-paid.

I understand that EU rules would allow for an EU resident (i.e. an agent) to establish VAT-paid status for a boat owned by a resident of the UK, when it is located in EU waters.

Is this true, and does the same possibility exist for EU-owned boats in UK waters (providing they were previously EU VAT-paid, and have been in the UK in current ownership)?

Angus Abrams

Robin Baron, chair of the Cruising Association’s Regulations and Technical Services group (RATS) responds:

It may be possible for some yachts to have the benefit of being eligible for both EU and UK VAT paid status.

An example of where this would be possible is a yacht which is located in the EU on 31 December 2020 (retaining EU VAT-paid status) and which has previously been located in the UK.

HMRC has made clear that if the yacht is returned to the UK before 30 June 2022 (or within the 3 year Returned Goods Relief (RGR) period if this runs until after 30 June 2022) the yacht would then be eligible to obtain UK VAT-paid status on return to the UK (provided that the RGR conditions are met (return within 3 years, no change of ownership or work to the vessel beyond running repairs)). [NOTE: This three year RGR condition has been dropped by the UK Government on 1 January 2022]

EU VAT paid status could then be regained if the yacht is returned to the EU within 3 years of leaving the EU (provided that the RGR conditions continue to be met).

Over time, it will be a challenge for a yacht to retain the benefit of both UK and EU VAT-paid status.

Robin Baron, chair of the CA's RATS group

Robin Baron is chair of the Cruising Association’s Regulations and Technical Services group. Credit: Robin Baron

The yacht will need to visit both the EU and UK on a three-year cycle so that RGR conditions are satisfied and there may be declaration formalities associated with EU entry for non-EU established yacht owners.

When the yacht is offered for sale the owner will have the advantage of a wider market of potential buyers but upon completion of the sale there will need to be a choice made by the buyer as to the vessel’s location on sale as inevitably the eligibility for VAT-paid status in one of the territories will be lost.

Changes of domicile (as opposed to residence) are not relevant to this question.

RATS is not aware of the use of agents in the EU to obtain or retain EU VAT status.

Responding to the question: Are there cases where changing domicile from EU to UK can be considered as an exceptional circumstance allowing a one off transfer of VAT-paid assets between jurisdictions without being charged VAT?

The UK has Transfer of Residence relief from VAT when moving your permanent place of residence to the UK. This extends to pleasure craft.

To claim relief, you must satisfy all of the following criteria:

  • you’ve been resident outside the UK for at least 12 consecutive months, prior to the date of moving to the UK
  • you’re importing the goods within 12 months of coming to live in the UK
  • you intend to use the goods in the UK for the same purpose they were used for prior to moving.
  • The vessel must have been owned by you for at least 6 months prior to its importation to the UK.

You must apply in advance for the relief on form ToR1. See: https://www.gov.uk/guidance/application-for-transfer-of-residence-relief-tor1

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

Brexit VAT - if your boat leaves the EU it will technically lose its EU VAT status

EU Returned Goods Relief rules can only apply if the boat returns to the EU after no more than three years, and there has been no change of ownership or alterations to the vessel

A UK registered yacht with UK VAT Paid Status (paid in 2016) was moved to the EU before 31 Dec 2020 and has evidence of being in the EU on that date, and has now adopted EU VAT Paid Status.

The vessel is being sold by its UK owner to another UK owner, but the vessel is remaining in the EU (Greece).

If the new owners cruise only in the EU, they are fine, but they would like to cruise to Turkey, Croatia or other non-EU countries (due to the Schengnen 90-day limit) before returning to the EU (Greece), where the boat will be kept.

  • If the boat leaves the EU, will it lose its EU VAT paid status and have to pay EU VAT?
  • Does it matter to the EU or to Greek authorities where the vessel is registered (UK) in regards to VAT status?
  • Presumably, if purchased with EU VAT status, the new owners would not be eligible for Returned Goods Relief if they brought the boat to the UK, and would need to pay UK VAT?
  • The previous owner had a suit of sails made for the boat in the UK. These are being given to the new owners in the UK, who will then take the sails out to the boat. Will they need to pay EU VAT on the sails when they take them to the EU?

Simon Farmer

Robin Baron, chair of the Cruising Association’s Regulations and Technical Services group (RATS) responds:

We are still in the early days after Brexit. The EU, governments and officials are still coming to terms with how to deal with various situations.

Robin Baron, chair of the CA's RATS group

Robin Baron is chair of the Cruising Association’s Regulations and Technical Services group. Credit: Robin Baron

The answers below should be read subject to this general comment.

There is a particular difficulty in Greece where owners who have a VAT invoice in the name of a previous owner are encountering difficulties with establishing VAT paid status with local officials.

The CA is currently addressing this problem with Greek customs officials.

If the boat leaves the EU, will it lose its EU VAT paid status and have to pay EU VAT? 
Yes. Technically upon departing Greece the vessel is exported from the EU. It will have to rely on the EU Returned Goods Relief rules (RGR) upon its return (conditions: no more than three years away, no change of ownership or alterations to the vessel) in order to retain EU VAT paid status upon import.

Does it matter to the EU or to Greek authorities where the vessel is registered (UK) in regards to VAT status?
It should not. Post Brexit it is quite likely that UK flagged vessels will be subject to greater scrutiny from the authorities of EU member states.

Presumably, if purchased with EU VAT status, the new owners would not be eligible for Returned Goods Relief if they brought the boat to the UK, and would need to pay UK VAT?
Yes.

 The previous owner had a suit of sails made for the boat in the UK. These are being given to the new owners in the UK, who will then take the sails out to the boat. Will they need to pay EU VAT on the sails when they take them to the EU?
Technically they will have to pay EU VAT. This may or may not be enforced.

Have a Brexit VAT question for our experts? Email us at yachtingmonthly@futurenet.com and we will do our best to answer them.

This article was updated following the announcement that the three year condition on Returned Goods Relief is to be dropped by the UK Government