confused about VAT

[aristorias]

I am thinking about buying a narrowboat. She is 15 years old, and is reported to have had two owners. She was built and fitted out by Eastern Caravans and I have viewed her. The fit out seems to have been done well and the boat is in fair condition. My concern is that the broker advises that there is no original documentation to show that VAT was paid when she was first built. On looking this up it appears that using HMRCs formula that she would have attracted Vat at purchase, and if this was not paid the liabiliy would pass on to me as last purchaser. I obviously have no wish to pay one fifth of the vessels value extra if the taxman knocks on my door.

My question is, is this a likely scenario and could it be used to negotiate a lower price? Also is there any way of checking to see if the VAT was paid in the first place?  Should I be worried or not?

Thanks for sharing your knowledge and experience.

[MtB]

1 minute ago, aristorias said:

My question is, is this a likely scenario and could it be used to negotiate a lower price? Also is there any way of checking to see if the VAT was paid in the first place?  Should I be worried or not?

 

No, no need to worry. The liability to account for VAT rests on the company building the boat, assuming they were VAT registered and reclaiming VAT on all the purchases associated with the build.

 

If they were not VAT registered e.g a bod building it in his back garden, then no VAT will have been due anyway.

 

Its a non-problem being made up by the broker and I've no idea why, as any professional broker would know this already. I'm wondering if they are trying to manipulate you into not buying the boat, for their own nefarious reasons.

[Alan de Enfield]

1 minute ago, aristorias said:

My question is, is this a likely scenario

 

No.

 

All that the broker means is that the proof of VAT payment has been lost.

I very much doubt that it has all of the correct paperwork it should have - Inland waterways boaters are not particularly concerned about 'paperwork' so it gets thrown away very quickly..

To have the "full correct paperwork" it should have at least :

 

The original Bill of sale

Every bill of sale since

The certificate of payment of VAT

An RCD compliance certificate

An owners manual showing all of the sytems on board, etc etc

 

The only one that seems to becoming more to the fore (by both brokjers and surveyors) is the RCD certificate of compliance - with out this it could be more difficult to sell and some brokers are saying you must have a PCA (Post Contruction Assessment) at a cost of £2k-£3k (+ any rectification costs)

 

If it doesn't have this certificate then you can make a substantially reduced offer.

I bought a boat without and offered 30% off the asking price which was accepted.

[MtB]

2 minutes ago, Alan de Enfield said:

All that the broker means is that the proof of VAT payment has been lost.

 

Except it that there is no such thing on a boat built in the UK, other than perhaps the original invoice issued by the builder, showing the VAT element charged. 

 

Whether the invoice is paid or not is not relevant. Once the invoice is issued, the HMRC will look to the company issuing the invoice for the VAT. They don't run around chasing subsequent owners of the vessel for the VAT if the builder fails to pay it over to HMRC.

 

 

 

 

[Alan de Enfield]

2 minutes ago, MtB said:

No, no need to worry. The liability to account for VAT rests on the company building the boat, assuming they were VAT registered and reclaiming VAT on all the purchases associated with the build.

 

That does need to checked tho' as there are boat builders contracts that have specifically stated that should a boat become due for VAT when they have not paid it the repsonsibility for the payment is with the buyer.

This has resulted in several people having a £20k+ demand from HMRC after HMRC have done an audit of the builder and found that they have sold boats at zero rating. It is one way that builders make their boats look cheaper than their competitors.

 

 

[MtB]

1 minute ago, Alan de Enfield said:

 

That does need to checked tho' as there are boat builders contracts that have specifically stated that should a boat become due for VAT when they have not paid it the repsonsibility for the payment is with the buyer.

This has resulted in several people having a £20k+ demand from HMRC after HMRC have done an audit of the builder and found that they have sold boats at zero rating. It is one way that builders make their boats look cheaper than their competitors.

 

 

 

Wholly disagree. That is a civil matter between the builder and the first purchaser. Nothing to do with the OP who will be second purchaser and not party to the contract you describe. If it exists in the first place, which it probably doesn't.

[Alan de Enfield]

2 minutes ago, MtB said:

If it exists in the first place,

 

Easy enough for you to check yourself.

[TheBiscuits]

Just now, Alan de Enfield said:

 

Easy enough for you to check yourself.

 

How do you check if that contract is part of the missing paperwork?

 

I don't think it's going to be an issue on a narrow boat anyway - all the dubious VAT agreements/contracts were for big widebeams that were close to VAT exemption under the size rules.

[MtB]

2 minutes ago, TheBiscuits said:

I don't think it's going to be an issue on a narrow boat anyway - all the dubious VAT agreements/contracts were for big widebeams that were close to VAT exemption under the size rules.

 

Exactly. This is why I question the existence of any contract agreeing to pay VAT afterwards in the first place.

 

The original point that Alan is muddying the waters about, is that the VAT due on the boat sale is a matter between the builder and the VAT office. 

 

1) Once the builder hands over the VAT charged on the sale, no public 'certificate' of any sort gets issued so there is nothing for the OP to see

2) There is a distinction between who is liable to pay the VAT and the current owner. The VAT is owed to them by the builder and HMRC cannot and do not arbitrarily decide to pursue a subsequent purchaser of the boat for unpaid VAT.

[Alan de Enfield]

1 minute ago, TheBiscuits said:

 

How do you check if that contract is part of the missing paperwork?

 

I don't think it's going to be an issue on a narrow boat anyway - all the dubious VAT agreements/contracts were for big widebeams that were close to VAT exemption under the size rules.

 

As I initially said - It is extremely unlikely it is going to be an issue on an Inland waterways boat.

 

I was simply pointing out that MTBs statement was a bit of a generalisation and not correct in all cases.

The Liability of VAT also follows the boat - the boat I bought had the VAT certificate (invoice) missing and I was held to be liable for the payment of a "large amount", but was able to get a certificate from the customs showing that VAT had been paid.  We were in the EU at the time and it is an EU form T2L which was stamped as being issued retrospectively.

[MtB]

1 minute ago, Alan de Enfield said:

I was simply pointing out that MTBs statement was a bit of a generalisation and not correct in all cases.

The Liability of VAT also follows the boat - the boat I bought had the VAT certificate (invoice) missing and I was held to be liable for the payment of a "large amount", but was able to get a certificate from the customs showing that VAT had been paid.  We were in the EU at the time and it is an EU form T2L which was stamped as being issued retrospectively.

 

Yet more unhelpful water-muddying.

 

You boat was imported into the UK. That is a different issue to the OP's question.

 

UNLESS.....

 

"Eastern Caravans" are actually in say, China and this IS an imported boat.

 

Perhaps the OP could illuminate?

[Alan de Enfield]

Just now, MtB said:

 

Yet more unhelpful water-muddying.

 

You boat was imported into the UK. That is a different issue to the OP's question.

 

You are the one guessing about how VAT applies on boats.

 

The VAT demand was not from HMRC I was NOT importing the boat at the time of the demand, I was buying a boat and it was to remain in the country. I could not leave the country until the VAT had been paid.

 

Our VAT rules are the same as the EU and the liability of VAT on a boat follows the boat.

 

I repeat again - the OP is very unlikely to be involved in having to pay VAT. But your constant assertions are not bourne out by facts.

[aristorias]

Thank you all for your replies. I feel more confident than before but there is still a small grey area in that if it is not important then why does the broker draw attention to it?

Edited March 12, 2022 by aristorias

[PD1964]

32 minutes ago, Alan de Enfield said:

 

 

The only one that seems to becoming more to the fore (by both brokjers and surveyors) is the RCD certificate of compliance - with out this it could be more difficult to sell and some brokers are saying you must have a PCA (Post Contruction Assessment) at a cost of £2k-£3k (+ any rectification costs)

 

If it doesn't have this certificate then you can make a substantially reduced offer.

 

Once again your trying to scare monger with the RCD, please give the names of these brokers that you are saying require a RCD before they will sell a boat. Now your saying Brokers are requiring a PCA to sell. Yes New builds less the 5 years I would expect some form of RCD, but come on a 15 year old boat. You and I know the majority of inland boats do not have a confirming RCD.

[Mike Hurley]

Maybe you have found an honest broker that gives you the facts, bet many dont.

[Athy]

12 minutes ago, MtB said:

 

 

UNLESS.....

 

"Eastern Caravans" are actually in say, China and this IS an imported boat.

 

 

I think they were beside the River Nene - possibly built by Pat Buckle?

A quick Google search found only a company in Australia, suggesting that the Neneside company is no longer trading.

[TheBiscuits]

1 minute ago, aristorias said:

Thank you all for your replies. I feel more confident than before but there is still a small grey area in that if it is not important then why does the broker draw attention to it?

 

Where is the boat?  A broker who deals more with seagoing boats will be much keener on VAT status than an inland only broker.

 

I'm with @MtB on this one.  Alan is technically correct as usual, but unless you are intending to take the boat to a different tax area - the EU for example - it won't affect you.

 

A yacht on the south coast that might want to regularly do weekend trips to France needs much more paperwork than a narrow boat on the Shroppie.

[Tracy D'arth]

Just now, Athy said:

I think they were beside the River Nene - possibly built by Pat Buckle?

A quick Google search found only a company in Australia, suggesting that the Neneside company is no longer trading.

In which case there is no trail for VAT to be charged.

Stop worrying about it, most boats don't even have a last owner that you can confirm.

[Alan de Enfield]

4 minutes ago, PD1964 said:

Once again your trying to scare monger with the RCD, please give the names of these brokers that you are saying require a RCD before they will sell a boat. Now your saying Brokers are requiring a PCA to sell. Yes New builds less the 5 years I would expect some form of RCD, but come on a 15 year old boat. You and I know the majority of inland boats do not have a confirming RCD.

 

Do a forum search - I think there have been 3 in the last 6 months which have been discussed.

There was an example of evidence of an RCD so the broker said they could only take it on if it had a PCA to confirm RCD / RCR compliance

As you know, the RCD is for the life of the boat.

[PD1964]

17 minutes ago, Alan de Enfield said:

 

Do a forum search - I think there have been 3 in the last 6 months which have been discussed.

There was an example of evidence of an RCD so the broker said they could only take it on if it had a PCA to confirm RCD / RCR compliance

As you know, the RCD is for the life of the boat.

No, be helpful and let us know these Brokers so sellers are aware of it. 
 People put a simple questions on here about paperwork and straight away you go on and on about the RCD and now it will also be the PCA, it’s becoming the Norm.

  As I say, be useful and give us a list of RCD/PCA demanding Brokers.

[MtB]

31 minutes ago, Alan de Enfield said:

Do a forum search - I think there have been 3 in the last 6 months which have been discussed.

 

 

Translation:

 

"I've already done a forum search and can't find any verifiable examples"

 

 

[ditchcrawler]

10 minutes ago, MtB said:

 

 

Translation:

 

"I've already done a forum search and can't find any verifiable examples"

 

 

I can recall one but not the details

[Slim]

56 minutes ago, Athy said:

I think they were beside the River Nene - possibly built by Pat Buckle?

A quick Google search found only a company in Australia, suggesting that the Neneside company is no longer trading.

If I recall correctly I was once moored for sometime alongside  a boat built by Pat Buckle and fitted out by Eastern Caravans. At the time it was a new build. There was never any mention of it being an import. It's name at the time was Neverland.

[aristorias]

The replies keep coming in..

 

The broker has not raised VAT as a specific issue it just that it appears appears in the boat's brochure. The company Eastern Caravans has nothing to do with China and the boat was built in England and will stay in the UK. I have no plans to cross the channel in it!

 

I believe Pat Buckle and another firm was at one time involved in building the hulls which were then fitted out by Eastern Caravans as some of their skills were transferable to boats.

 

Thanks again for the comments.

[Mike Tee]

While the broker is answering questions, ask him / her if they own the boat, or are acting as a broker - it makes a big difference to your rights as a buyer.

Specifically regarding VAT, if he is acting as a broker for a third party, and that third party is not registered for VAT, your question is, I believe, answered.