This article tries to summarise our understanding of the new rules and hopefully answer many of the questions you may have.
Please be aware that the new regulations are being clarified daily and our views expressed below are merely our understanding of the situation at this time and should not be relied upon as any kind of tax advice or legal opinion.
If you require any specific advice then please do not hesitate to contact us and we will be very happy to help or direct you towards people that can.
UK Registration is still very popular for both UK and non-UK owners alike and the eligibility requirements for UK Registration has not changed even now that the UK has left the EU.
It means that there is no need or requirement for any yacht owner currently holding a UK registration for their vessel to change their registration on eligibility grounds.
Non-UK residents can still apply for UK Registration if eligible and UK Flagged Vessels can still sail freely around EU waters.
It is important to note that the country of registration does not necessarily reflect the VAT paid status of a yacht.
1. UK VAT Paid vessels lying in UK Waters
UK VAT Paid vessels lying in UK waters as of the 31st December 2020 will lose their EU VAT Paid Status or what is commonly referred to as “Union Status” and be classed only as UK VAT Paid.
UK residents wishing to sail in EU waters can declare for “Temporary Admission *” and sail in EU waters for up to 18 months without being liable for EU VAT charges.
Owners are strongly recommended to seek a letter from their local UK marina or harbour authority confirming the vessels location as of the 31st December 2020.
Owners are also advised to check that the have the original VAT Invoices which should contain a reference to the vessels name and HIN number for identification and carry all the original ships papers when travelling to and from EU waters.
2. UK VAT Paid vessels lying in EU Waters
Vessels which have UK VAT paid status and were in EU waters prior to December 31st 2020 are considered to have and will retain their EU “Union” VAT Paid Status. But will however lose their UK VAT Paid Status.
We again strongly recommend that owners obtain and retain documentation from the local authorities confirming the vessels location in EU waters on the 31st December 2020.
Owners wishing to return with their vessels to the UK may be eligible for Return of Goods Relief * (RGR).
Temporary Admission (TA) does not apply to UK residents wishing to temporarily sail in UK waters if they have lost their UK VAT Paid Status.
UK residents looking to purchase a new yacht after the end of the transition period will need to decide where they are going to base their yacht and where they will sail for the majority of their time as this will determine where they are best placed to account for VAT.
It should be noted that on new purchases VAT is payable at the point of use although for yachts continually transiting EU waters with no permanent homeport this aspect is still somewhat a grey area.
Universal Yachting has the facility to account for VAT in France for owners wishing to purchase a New Dufour and maintain their vessels “Union VAT Status” if they wish to sail exclusively in EU waters. As explained above the vessel can still be registered in the UK.
Naturally for UK owners wishing to sail predominantly in the UK then we would account for UK VAT in the usual way on the purchase of any new yacht.
This is a complex matter and there is still a lot of ambiguity but simply RGR is intended for owners of vessels (or indeed any goods) that were originally in the UK but then subsequently moved (exported) to the EU. Vessels / Goods can be imported back into the UK without paying UK VAT or import tax if the RGR rules apply.
The general conditions for RGR for relief from both import VAT and duty are that the boat:
There are some special conditions for RGR until the end of 2021 due to the fact that there are a lot of vessels which have been in free circulation within the EU for more than 3 years as well as the added complications of the Covid Pandemic.
If the boat has been in the UK in the past, then until 1 January 2022, it does not matter how long ago, as long as it can be proven that the boat has previously been in the UK and the other conditions to be eligible for RGR can be met. This is because there is an automatic waiver of the three-year rule for goods which were in the EU at the end of the transition period (after 31 December 2020) that are returned to the UK within one year of that date.
Temporary Admission (TA) is a reciprocal arrangement between the UK and the EU. UK owners of VAT Paid vessels can sail freely in the EU for up to 18 months without being liable for importation taxes/charges. Equally EU owners of vessels with “Union Status” can sail in the UK for the same period.
It is important to note that you cannot be a resident of the country that you are applying for TA in.
So UK residents with vessels in the EU that retained “Union Status” and as a result lost their UK VAT Paid Status are not eligible for “Temporary Admission” back into the UK and can not enter UK waters without being liable for VAT unless eligible for RGR, Inward Processing Relief or Transfer of Residence Relief. The same would apply to EU Owners if they owned a UK VAT, Paid Vessel.
Given the changes in the UK/EU VAT position, it is clear that any vessel purchased within the EU and then subsequently brought back into the UK will be liable for UK VAT and Import Duties. Equally the same applies to any vessels sold in the UK bound for EU waters.
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Mercury Yacht Harbour