VAT and customs clarification for recreational boaters

GB boat owners may have more options to claim EU VAT paid status than they realise

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A consortium of British and European marine organisations, including the RYA and British Marine, has published a set of eight scenarios to help boat owners unravel the complexities of post-Brexit VAT status on second-hand boats.

As previously reported in PBO, since 1 January 2021 British owned/registered boats are only permitted free circulation (VAT paid) in EU countries under specific conditions.

Long term UK cruisers in Europe face paying VAT twice on boats

Furthermore, some of those boats may become liable for VAT upon re-entry to the UK – even if they have already paid before.

So which used boats will retain EU VAT-paid status and which ones won’t?

WHY DOES IT MATTER?

Loss of EU VAT-paid status could be costly, because on the much bigger EU27 market, a boat that only has UK VAT-paid status will be taxed upon import to the EU – a cost that will hit the resale value of UK boats.

JARGON BUSTER

TA – Temporary admission granted to visiting boats from third countries for up to 18 months

RGR – Returned Goods Relief is an avoidance of VAT that applies to any yacht that is re-imported to a territory and which hasn’t changed hands while being ‘abroad’ for less than three years.

Losing EU VAT paid status

Scenario 6 (see full press release below) illustrates the reality of Brexit for the vast majority of British boat owners. Basically anyone whose boat was in GB (Northern Ireland is being treated differently) on Brexit day and who is unable to prove that their boat had been in a EU27 country in the last three years is not eligible for returned goods relief (RGR) and has ‘lost’ EU VAT-paid status (if they even knew they had it).

Any EU buyer would be looking at having to pay an additional amount of VAT to formally import the yacht.

Scenario 5 illustrates a continuation of a VAT relief arrangement for a boat belonging to a person who normally lives in GB, but who owns property or a business in one of the EU27 countries.

Maintaining EU VAT paid status

Brexit-Flags

The other six scenarios illustrate how certain boats can potentially maintain their EU VAT-paid status.

Scenarios 1-4 illustrate the most straightforward cases: any pleasure craft that was in a EU27 country on Brexit day and hasn’t changed hands since being ‘exported’ from the UK (all cross-Channel passages are now classed as import/export) is allowed to keep its EU VAT status.

Those same yachts can now also return (be exported) to GB without paying VAT again (claiming RGR) in either of two cases: if they’ve been out of GB for less than three years, or if they’ve been away longer, but are returned before 30 June 2022 (this is a one-off Brexit concession).

Thereafter, until the boats change hands in either of the jurisdictions, or three years passes without a new import/ export, these yachts are permitted to claim RGR in both the UK and the EU. 

Marine VAT expert Simon Anslow has written a comprehensive guide to understanding the topic for berthoninternational.com explaining that some of the boat owners referenced above may effectively be able to maintain dual status.

But he also references a further group of boat owners that may benefit from the RGR/import/export loop, which is illustrated in scenarios 7 and 8.

He states: ‘Going back to our owner whose VPS yacht [VAT-paid status in UK or EU] was in the UK at Brexit – we know that that yacht now has UK status and effectively lost its EU27 status, BUT if that owner has had the yacht within the EU27 at any time and they return to the EU27 within three years of the last departure (and this can be evidenced), then they have a potential eligibility for RGR and reviving their EU27 VPS.

‘Further if they return to the UK within three years… and so on, so while they cannot technically have dual status, they do for all practical purposes.’

Cruising Manager at the RYA, Stuart Carruthers, adds: “This is another post-Brexit minefield that many of our members have had difficulty in negotiating. We hope this set of scenarios will help with that.”

The full press release follows…

Following the UK’s withdrawal from the EU, there have been many questions which have caused confusion and uncertainty for the leisure marine sector both in the UK and in the EU27.

Arguably, the biggest has been around the VAT status of recreational craft at the end of the transition period.

In an unprecedented stance, the International Council of Marine Industry Associations (ICOMIA), European Boating Industry (EBI), European Boating Association (EBA), British Marine (BM) and the Royal Yachting Association (RYA) have joined forces to provide clarification on VAT and customs for recreational boating companies and users.

The five organisations have taken the exceptional decision to release this guidance to members and non-members.

Post_Brexit_VAT

The group put forward the key scenarios affecting boaters and are pleased to confirm that the Commission has now responded, validating the interpretation of the guidance and how VAT should be applied under the various examples.

This follows a push led by the EBI with the European Commission to provide this important clarification. For the original document, please contact the participating organisations.

The positive confirmation of the scenarios should now also be recognised by each EU country in their dealings under this matter. Failure to do so could result in formal complaints being made to the Commission.

Further clarification will be sought from the European Commission on the documentation required and interpretation of establishment of “person established in the customs territory of the Union.”

Philip Easthill, Secretary General of the EBI, said: “We are delighted to have received the responses from the Commission that companies and boaters urgently need. Given the impact of Brexit on businesses and supply chains, clarity on VAT for second-hand boats is highly important. The cooperation of EBI with our partners has been key and we will continue to advocate for clarity on VAT issues through our channels at EU level.”

Lesley Robinson, CEO of British Marine, said; “Collaboratively working together with other leisure marine industry bodies is a highly successful way of collectively garnering results, and this recent clarity received on VAT issues post-Brexit will greatly benefit British Marine members and the UK leisure marine industry. The answers to these scenarios will be welcomed in particular by UK boat retailers and brokers to assist in maintaining a healthy trade of second-hand boats across the UK and EU.”

Udo Kleinitz, Secretary General of ICOMIA, added; “The industry is affected by the changes in VAT regime through loss of boaters expenditure in marinas and tourism. Our members have asked us for support on this matter which is why the collaboration with EBI, BM and the user organisations helps in raising the profile and relevance of the topic with the applicable agencies.”

VAT issues post-Brexit: FAQS

The following acronyms are used:
TPE = The time at which the transition period ended – 31 December 2020, 23:00 UTC
VPS = VAT Paid Status: i.e. in free circulation
EU28 = EU before TPE, i.e. including UK
EU27 = EU after TPE, i.e. excluding UK
GB = England / Scotland / Wales excluding Northern Ireland
TA = Temporary Admission
RGR = Returned Goods Relief
UCC = Union Customs Code
The Union Customs Code referred to within this document can be found here.

Scenario 1

  • GB owned/registered pleasure craft
  • In free circulation (VPS) within EU28 pre-TPE and has supporting documentary evidence)
  • Within EU27 as at TPE

Impact on VAT Paid Status (VPS) = ✓ EU VAT Paid Status
The boat retained EU VPS status.

Scenario 2

  • GB owned/pleasure craft
  • In free circulation (VPS) in EU28 pre-TPE (and has documentary evidence)
  • Within an EU27 as at TPE
  • Boat leaves EU27 (for GB or elsewhere) and then returns to the EU27

Impact on VAT Paid Status (VPS) = ✓ RGR & EU VAT Paid Status
Boat is eligible to RGR on return to the EU27 and will have EU VPS, provided that all the conditions established in Article 203 UCC are fulfilled and, for VAT, that the boat is imported by the same person who exported it.

Scenario 3

  • EU27 owned/registered pleasure craft
  • EU28 VPS pre-TPE (and has documentary evidence)
  • In EU27 as at TPE
  • VAT paid on original new purchase in GB a number of years ago
  • Subsequent ownership and location within the EU27

Impact on VAT Paid Status (VPS) = ✓ EU VAT Paid Status
The boat keeps its Union status and it is therefore in free circulation with EU VPS.

Scenario 4

  • GB owned/registered pleasure craft
  • Business owned
  • EU VPS before TPE
  • In EU27 as at TPE
  • Kept and used within the EU27
  • Long-term lease to individual for private use
  • GB VAT accounted for on annual lease charge

Impact on VAT Paid Status (VPS) = ✓ EU VAT Paid Status
According to the information provided, the boat has Union status and keeps it unless the boat is taken outside the customs territory of the Union.

Scenario 5

  • GB owned/registered pleasure craft
  • Owner is ordinarily resident in GB
  • Using boat within EU27 on TA
  • Owner has an EU27 holiday property where they keep the boat moored (in their name)

Impact on VAT Paid Status (VPS) = ✓ Temporary admission
A person is established in the customs territory of the Union if he/she fulfils the conditions established in Article 5(31) UCC. If the person is not established in the customs territory of the Union, then he/she can declare the boat for temporary admission if it has non-Union customs status.

Scenario 6

  • GB or EU27 owned/pleasure craft
  • In free circulation within EU28 pre-TPE (and has documentary evidence)
  • No evidence of having been in the EU27 previously; or
  • Ownership has changed since it was last in the EU27
  • In GB as at TPE

Impact on VAT Paid Status (VPS) = EU VAT Paid Status Lost
Article 203 UCC requires evidence of a previous export to the UK. The Commission guidance indicates that, in the absence of an export declaration, evidence of the previous movement of the boat to the UK is required. If the boat has never been in EU27 it is impossible to provide evidence of movement to the UK.

Scenario 7

  • EU27 owned/pleasure craft
  • In free circulation within EU28 pre-TPE (and has documentary evidence)
  • Had previously been evidenced as being within the EU27 within the last three years
  • In GB as at TPE
  • Same owner who brought it out of EU27, returned to the EU27 within three years of departure

Impact on VAT Paid Status (VPS) = ? Documentation required
It is for the Member State to decide whether the conditions for RGR is possible (Article 203 UCC) are met.

Article 203 UCC requires evidence of a previous export to the UK. The Commission guidance indicates that, in the absence of an export declaration, evidence of the previous movement of the boat to the UK is required. Member State authorities must therefore assess whether that satisfactory evidence can be provided in this scenario.

Scenario 8

  • GB owned/pleasure craft
  • In free circulation within EU28 pre-TPE (and has documentary evidence)
  • Had previously been evidenced as being within the EU27 within the last three years
  • In GB as at TPE
  • Same owner who brought it out of EU27, returned to the EU27 within three years of departure

Impact on VAT Paid Status (VPS) = ? Documentation required

It is for the Member State to decide whether the conditions for RGR (Article 203 UCC) are met. Article 203 UCC requires evidence of a previous export to the UK. The Commission guidance indicates that, in the absence of an export declaration, evidence of the previous movement of the boat to the UK is required. Member State authorities must therefore assess whether that satisfactory evidence can be provided in this scenario.

Any questions can be directed to the relevant leisure marine representative body via the details below:

RYA: cruising@rya.org.uk

British Marine: brexit@britishmarine.co.uk

EBA: admin@eba.eu.com

EBI: office@europeanboatingindustry.eu

ICOMIA: info@icomia.com