Brexit: UK-flagged yachts and VAT
Having left the EU customs territory from the start of 2021, the UK is now considered a ‘third country’, affecting the VAT treatment of UK-flagged yachts in EU waters. Likewise, the treatment of EU-flagged yachts entering British waters is also affected.
The change means UK-flagged vessels are now treated by the EU like any other non-EU flagged pleasure craft.
A UK resident buying a new boat from a UK dealer for export
A resident of the UK can buy a new yacht from a dealer in the UK ex-VAT, as long as the boat is delivered to the buyer outside of British waters. If bringing the boat into the EU, it can be imported under the Temporary Admission (TA) regime without paying VAT for up to 18 months. The boat can not charter or change ownership while in the EU under TA.
Taking a UK VAT-paid yacht into EU waters
The yacht is entitled to enter EU waters under TA, provided that the owner and/or captain are UK residents and the owner is on board upon entry. (Vice versa, EU residents may enter British waters under TA VAT-free for up to 18 months). Where a UK VAT-paid yacht was in the EU customs territory on December 31, 2020, its VAT status is retained.
A UK resident buying a used boat in the EU
If a UK resident buys a pre-owned yacht upon which VAT was paid (to an EU country other than the UK) before 31 December 2020, the boat retains its VAT-paid status for as long as it remains in the EU. It may sail out of the EU and return within a maximum period of three years without losing its VAT-paid status (Returned Goods Relief). A yacht owned and imported by a UK resident is now subject to UK VAT, regardless of VAT having been paid in the EU. The amount of VAT payable is calculated on the basis of the boat’s value at time of importation.
Returning a UK VAT-paid yacht to the UK
Within three years of exportation from the UK, a UK VAT-paid yacht can return without VAT being payable again (Returned Goods Relief), provided ownership has been unchanged and no more than running repairs have been carried out that did not increase its value.
Non-UK resident purchase of a new boat for export
UK dealers can sell a new yacht to non-UK residents free of VAT, provided that the boat exits British waters being transported or, otherwise, under its own power within six months of delivery, under the UK’s ‘sailaway’ provision.
There remains ambiguity over the VAT treatment of yachts that are UK-flagged, VAT-paid (either in the UK or EU), and were neither in the Union Customs territory (UCT) nor in the UK as at 23:00h GMT of December 31, 2020 and returns to the UCT within the maximum period of 3 years. There is, as yet, no direction on the applicability of Returned Goods Relief (RGR) in this instance.
Disclaimer: The above article does not constitute legal advice and ESTELA Shipping does not accept any responsibility for actions taken based on its contents.
This article was prepared with the kind cooperation of Miguel Ángel Serra, Partner at Albors Galiano Portales, a leading firm in shipping, transportation, insurance and reinsurance law. Contact: maserra@alborsgaliano.com +34 971 57 07 00 www.alborsgaliano.com