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Brexit and the VAT status of yachts into 2021

We trust this note finds you well and hopefully not affected by the strains brought upon us by the challenges of 2020 not the least of which is the spectre of Brexit which looms large, particularly in respect of the VAT status of boats.

To that end, Ancasta has been working hard to understand and interpret the rules that may apply into 2021 and the purpose of this note is to share with you what we do know so far.

Crucial to this subject matter are the provisions of the Returned Goods Relief regulations which allowed that a vessel that had previously had VAT paid on it and been exported from the UK or EU may qualify for relief on return if it:

  • was imported normally within 3 years of its export from the UK or EU
  • was imported by the person who exported it from the UK or EU
  • has undergone no more than running repairs outside the UK and EU that did not increase its value.

Now HMRC are aware that a number of vessels which have had VAT paid on them have left the UK and been in free circulation in the EU for a time considerably longer than three years.  They have therefore provided a further concession to allow an extension period of one year until 31 December 2021 for those boats to return to the UK and retain their VAT paid status provided that:

  • The boat was previously in the UK so that it will be deemed to have been exported on the date that it left the UK, and
  • It must return to the UK within the timescale under the same ownership under which it left without having undergone extensive refit work.

Naturally, boats owned by UK residents, which are VAT paid and sitting within UK waters as at 23h00 hours on Thursday, 31st December 2020, will be accepted as VAT paid in the UK. We strongly advise that you get in touch with your marina or harbourmaster and get written confirmation that your boat was on her berth in the UK at this time.

Please note that should these boats be sold in the UK thereafter, they will retain UK VAT paid status but will in all likelihood, not be considered VAT paid in the EU.  Nevertheless, as is the case now, boats owned by UK residents, may be granted temporary admission to EU waters to sail for pleasure or leisure for periods of up to 18 months at a time subject to the local regulations that may be applied at that time by respective EU authorities.

It is for all boat owners to assess therefore whether it is best for their boats to remain in the EU, particularly if they are more likely to be sold in the EU, or to bring them back to the UK within the extra year’s concession if the market is here for their resale.

Finally, where an EU/UK VAT paid vessel has changed hands during it’s stay in the EU, it will not qualify for the concessional year from HMRC because it will not be able to comply with the requirement to be returning under the same ownership.

As always these regulations are constantly under review by HMRC and may change so please do take your own tax advice as each situation is different but if you would like to discuss the sale of your boat, Ancasta brokers are always on hand to help, wherever your boat is lying.