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22nd Mar 2021 by Rightboat

Used Boats, VAT and Brexit: What We Know So Far

Brexit has finally happened and in the boating world it has caused a few stormy seas. With the UK leaving the EU, freedom of movement, both of people and boats, is now no longer as straightforward as it once was. So what are the implications for boat owners or those looking to buy a new or used boat?

While the legislation is still being written, and there are a lot of questions which will need answering, we have taken a look at what we do know so far.


What happens if I have a boat in the EU and bring it back to the UK, or vice versa?


The main issue with Brexit is VAT and which country it now needs to be paid in. Whilst the UK was part of the EU a boat which had VAT paid status could be kept anywhere in the EU. Now things are somewhat different, and where you buy or keep a boat could affect the VAT you need to pay. Essentially, the customs status of vessels will be dependent on their location on 31st December 2020. Yachts which were located in the UK on that date will have lost 'Union-goods status'. This means that they will no longer be regarded as having EU VAT-paid status.


Ultimately, if you want to move a boat to or from the UK/EU you may be liable to pay VAT, even if VAT has already been paid. If for example, your boat has been kept in Spain and has VAT paid status, if you now wanted to move it to the UK you could be liable to pay UK VAT again. However, if you paid UK VAT on your boat and then kept it in the EU, HMRC are offering a Returned Goods Relief (RGR) on British-owned vessels which were located outside the UK when Brexit happened (see below for more on RGR).


Heading in the opposite direction, if you wanted to take a boat out of the UK and keep it in EU waters, you would be liable to pay VAT in the EU, unless you opt to use the Temporary Importation scheme (see below). 


In short, if the boat was VAT paid on 31 December 2020 in Europe it retains its European VAT paid status. If it was based in the UK at that time, it will be UK VAT Paid only.  


How much is UK import tax on a boat?


Boats are considered the same as any other goods and are therefore taxed at 20% VAT.


Can you explain the Returned Goods Relief (RGR) and which boats are applicable for it?


In response to the issue of British boat owners potentially having to pay VAT twice on a boat, HMRC has announced that British-owned yachts which were located outside of UK waters on 31st December 2020 – and have been out for less than three years - fall under the Returned Goods Relief (RGR). This means that until 31st December 2021 if your boat has been outside of the UK for less than three years you have a window to return it to the UK without paying VAT on it again.


What is Temporary Importation (TI) and how long does it last?


For British boat owners this is one of the main benefits of Brexit. It means they can now keep a private boat in EU waters without paying the import VAT of 20% by using the Temporary Admission or Importation scheme. It allows them to keep their boat in the EU for up to 18 months without paying VAT on their vessel. Once the 18 months are up, a boat only needs to be taken out of EU waters for 24 hours before the VAT clock starts again for a further 18 months. A transit log and evidence of time spent outside of EU waters will need to be kept. 


I’m British. Can I buy a vessel with Union status and keep it in the EU? Or do I need to re-register it?


If the seller of the boat can show proof that VAT has already been paid in the EU, then the boat will retain the status of Free Movement on purchase, even if you choose to flag it to a UK registry. If you wish to import the boat into the UK you will be liable to pay UK VAT. If you want to keep it in the EU then, as it already has Union status, you can do so. Essentially, as far as customs is concerned, the ownership of a vessel is not relevant, it is VAT paid Union status which is relevant. 


In fact, the current thinking by the RYA is that re-registering your boat in another EU country will not be of any benefit and may mean you have to comply with that country’s legislation. While it is unclear what that may fully look like it could include having to show that country’s competence certificates (which may have to be taken in the national language etc). 


What VAT evidence do I need to show EU or UK customs officials if asked for it?


Boat owners in the UK and EU will now need to carry evidence of VAT status onboard their vessels at all times in case they are asked for it by customs officials. This includes evidence of VAT paid and evidence of where their yacht was at the end of the transition period. 


Are there any new rules to sailing in UK waters now?


If you are entering UK waters from the EU, you must fly the ‘Q’ flag and keep it up until you have reported to customs authorities. You will need to report whether UK VAT has not been paid on the vessel, as well as any other import-related or immigration issues. These include whether you are carrying any prohibited or restricted goods - or goods which require import duty paying on them - there is a notifiable illness on board, any repairs or modifications have been made on the boat since it was last in the UK (this may affect the boat’s eligibility for Returned Goods Relief), and of course whether any passengers need immigration clearance. 


What do all the VAT changes mean for prospective new and used boat buyers?


Purchasers of new and second hand boats will now need to think more carefully about where they buy their boat and where they want to keep it in the long term. Essentially, paying UK or EU VAT will be dependent on the location of the purchased yacht, not the residency of the person buying it.


If they want to keep their yacht in the UK, it will make sense to buy the yacht in the UK and, if it’s a new boat, pay the VAT in the UK. They can then use the Temporary Importation rules (see above) to cruise in the EU for up to 18 months without becoming liable for EU VAT. 


When it comes to used boats, the sale of a boat doesn’t affect the VAT status if it is sold within the region i.e. the UK or EU, where that VAT was originally paid. So if you want to buy a used boat in Spain or France and it is already VAT paid, then you can keep it there irrelevant to your residency status.


How have my immigration rights changed?


If you’re British, your boat might be able to use the Temporary Importation scheme to remain for up to 18 months in the EU, but you can’t. Now the UK is no longer part of the EU, the Freedom of Movement is no longer applicable, and you may only spend 90 days in any 180 days in the EU. This amounts to three months a year non-consecutively. 


The legislation with regard to Brexit is constantly evolving, and it will take some time to get a clear picture. However, the good news is that there are still lots of new and used boats for sale in both the UK and EU, and here at Rightboat.com we are on hand to help you navigate where is the best place to buy and keep your next boat. So please don’t hesitate to get in touch!


You May Also Like ...

1. EUROPE: Do You Need a Licence to Sail a Boat?

2. UK: Do You Need a License to Sail a Boat?

3. 11 Best European Marinas

4. UK Charters

5. 10 TOP UK Sailing Location You Must Visit This Year

6. Marine Insurance Guide

7. Know about VAT on Boats

8. What You Need to Know on Pre-Purchase Surveys

9. Recreational Boat Loans and Financing in Detail

10. Everything you wanted to Know about Chartering a Yacht


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