Going VAT free?

[Gary Peacock]

Well if the information in Canal Boat is correct it seems that HMRC have given the green light to Kenny Haynes of Little Brown Mouse to produce such systems under the VAT rules for Caravans & Houseboats.

 

The Butty is zero rated (A bit more to it than that in reality but it is more or less) and VAT is payable on the Tug their example costing £5,000-£8,000 so if we call that worst case £9400.00 inc VAT for the propulsion (Butty) subtract that from lets say £90K inc VAT for a traditional narrowboat that gives a balance of £80,600.00 inc VAT for the butty, but without the VAT on that we get £68,595.75 so the good old VAT man is knocking you off £12,004.25p not to be sniffed at is it? Obviously the more the boat costs the juicer the deal gets.

 

Now I did look into doing this before and was offered the following guidance from at that time HMCE

 

7.1 What is a houseboat?

A houseboat is defined for the purposes of VAT as being a floating decked structure:

 

which is designed or adapted for use solely as a place of permanent habitation; and

which does not have the means of, and which is not capable of being readily adapted for, self-propulsion.

 

7.2 What is meant by self-propulsion?

This term refers to any vessel that is either:

 

independently propelled; or

not independently propelled but could readily be adapted to be capable of self-propulsion, for example by installing an engine, propeller or mast.

It is unlikely that a vessel such as a barge or a yacht would be regarded as a houseboat for the purposes of VAT because they are likely to lend themselves to being readily adapted.

 

At that time they brought my attention to the closing paragraph of Clause 7.2 of HMRC Reference:Notice 701/20 (February 2004), and expressed the views that providing a tug to accompany the barge would be adapting it to/providing a means of propulsion in the same way strapping on a outboard would be.

 

Now it seems that HMRC have seen the error of their ways this will offer up lots of possibilities throughout the industry to allow customers to make a saving on tug & butty systems. On a nice big broad beam at around £200k thats going to save the customer about £28K.

 

Now this set up isn't going to be to everyones taste but the savings are attracting enquires already because people don't like paying VAT.

 

So the next step is to pin HMRC down on this decision, normally they only offer guidance not written confirmation but with quite a few builders awaiting some form of official green light to start building VAT free houseboats this shouldn't be too hard.

I feel sure the BMF or CBA should be able to provoke a national statement even if the local VAT office wont.

 

It's nice of President Gordo to give something to boaters on the cheap at least isn't it?

 

Just one closing thought, it strikes me that this would probably be better if the butty came from one builder and the tug came from another, that way it might seem less like a VAT fiddle to HMRC?

Edited December 19, 2007 by Gary Peacock

[Gary Peacock]

Just another thought on this.

 

Would the VAT saving attract you enough to offset the complications this system would involve? We have had about 5 enquires about it so far but most of those didn't seem to consider the complication of fixing the two boats together.

 

But then again I don't suppose most owners would ever split them.

[chris w]

What you gain on the swings you might lose on the roundabouts when you come to sell it. The added complication/possible point of failure may put someone off and VAT saving won't be a factor in a secondhand sale. At the end of the day one is only saving about 10% on the new purchase in exchange for added complexity etc.

 

Chris

[Timleech]

But then again I don't suppose most owners would ever split them.

 

 

In that case it is a VAT fiddle, surely?

 

Tim

[Yoda]

It is possible to get around the term 'self propulsion' but I think the additional cost out-weigh the VAT savings. You would better minded to seek sale in other countries where VAT rules are different. This could be such as your business is registered in Andora or Switzerland for the sale of boats.

[Gary Peacock]

In that case it is a VAT fiddle, surely?

 

Tim

 

I think "loop hole" is how the trade would describe it!

 

But if HMRC are happy with it at the moment people will take advantage.

 

And if HMRC decide they aren't in any future business brief they issue, the builders will have to be very careful not to be left with the VAT bill or word the contract to drop the bill in the customers lap!

 

So that's why it will need a bit of clarification from HMRC first before I for one will be rushing in.

 

The trick is going to be to get that clarification in writing.

[chris w]

or word the contract to drop the bill in the customers lap!

 

Hope everybody reads Ledgard contracts very well!!!!

[Yoda]

Just a thought, if it's your home, that would be the same as bricks and mortar and you don't pay VAT on houses.

[Gary Peacock]

Just a thought, if it's your home, that would be the same as bricks and mortar and you don't pay VAT on houses.

 

An old argument that the RBOA among others fought without success, I am afraid it looks like this one remaining loop hole (The other one was the "qualifying ship" for VAT purposes that they closed a while ago) is the last remaining chance of VAT relief short of a DIY amputation of a limb and the disability VAT rules.

[Yoda]

Isn't there something in Magna Carta about the rights of the common man?

[Gary Peacock]

Isn't there something in Magna Carta about the rights of the common man?

 

I would bet the VAT man's got a guidance note to his advantage on that one too!

[Travis]

I'm glad we had our boat built in 2004, before the VAT rules changed, saved us about £20k.

 

Andy.

Edited December 19, 2007 by Travis

[John Orentas]

Sounds to me like the 'Tap room lawyers' are at it again, if anyone thinks they can persuade the Customs & Excise or whatever the authority is called now, that a fully fitted out boat is a 'working butty' or even a 'houseboat' simply because it doesn't have an engine..

 

Well I wish them the best of luck.. I had an idea that little loophole was closed off some years ago.

Edited December 19, 2007 by John Orentas

[WRGie James]

Well if the information in Canal Boat is correct it seems that HMRC have given the green light to Kenny Haynes of Little Brown Mouse to produce such systems under the VAT rules for Caravans & Houseboats.

 

Does this also mean that caravans are vat free? Sorry slightly off topic.

 

Surely if you have a tug and butty system you have to end up getting a mot (dont know boating terminology for it) for both boats and a BW license for both boats dont you? That would then mean your savings will be gone in a few years time?

[chris w]

Surely if you have a tug and butty system you have to end up getting a mot (dont know boating terminology for it) for both boats and a BW license for both boats dont you? That would then mean your savings will be gone in a few years time?

 

Good point

[Gary Peacock]

I take it Waterways World published something about not paying VAT on boats again in the February edition? I haven't seen it but have already had 3 people telling me that you can zero rate boats again.

 

Will have to go buy a copy to have a nosey but to my knowledge the last business brief from HMR&C still stands on their interpretation of "Qualifying Ships" and the tug butty combination under the "House Boat Definition" is skating on very thin ice especially if you aren't very careful about how you describe and sell it.

 

Anyway I will look on with interest to see how HMR&C will react!

Edited January 18, 2008 by Gary Peacock

[jeb]

I take it Waterways World published something about not paying VAT on boats again in the February edition? I haven't seen it but have already had 3 people telling me that you can zero rate boats again.

 

Will have to go buy a copy to have a nosey but to my knowledge the last business brief from HMR&C still stands on their interpretation of "Qualifying Ships" and the tug butty combination under the "House Boat Definition" is skating on very thin ice especially if you aren't very careful about how you describe and sell it.

 

Anyway I will look on with interest to see how HMR&C will react!

 

To quote WW

 

Donna came across the subject of VAT.She was planning to live aboard,but the fact that the boat would have a fixed engine for propulsion seemed to rule out any exemption.

 

Then it occured to her that the boat would be in excess of 15 gross tons so , if it could be classed as a commercial vessel, it would become a 'qualifying ship'.

She discussed this with her local HM Revenue and Customs office and it was agreed that,provided the sloon had no fixed furniture,it could be considered as a hold for the transporting of goods. This meant that the boat,and any maintenance required,would be exempt from VAT. End quote.

 

Hmmm

[Gary Peacock]

To quote WW

 

Donna came across the subject of VAT.She was planning to live aboard,but the fact that the boat would have a fixed engine for propulsion seemed to rule out any exemption.

 

Then it occured to her that the boat would be in excess of 15 gross tons so , if it could be classed as a commercial vessel, it would become a 'qualifying ship'.

She discussed this with her local HM Revenue and Customs office and it was agreed that,provided the sloon had no fixed furniture,it could be considered as a hold for the transporting of goods. This meant that the boat,and any maintenance required,would be exempt from VAT. End quote.

 

Hmmm

 

That's a load of rubbish but strangely the kind of advice offered at local level by HMR&C but when the boys from HMR&C at New Kings Beam House start quoting their interpretation and issuing VAT repayment demands it gets really messy.

 

So on the "Qualifying Ship" side at least nothing as changed.

 

I think they might have to make a comment on the house boat loop hole because it will definitely be exploited.

 

Interestingly HMC&E as it used to be likened it to me as being like building a boat without an engine and the customer then clamping on a outboard. Their claim was if that was allowed to be classified for VAT purposes as a houseboat many cruisers could could also be deemed to be houseboats when sold without an outboard and so having no meens of propulsion!

Edited January 18, 2008 by Gary Peacock

[Yoda]

That's a load of rubbish but strangely the kind of advice offered at local level by HMR&C but when the boys from HMR&C at New Kings Beam House start quoting their interpretation and issuing VAT repayment demands it gets really messy.

 

So on the "Qualifying Ship" side at least nothing as changed.

 

I think they might have to make a comment on the house boat loop hole because it will definitely be exploited.

 

Interestingly HMC&E as it used to be likened it to me as being like building a boat without an engine and the customer then clamping on a outboard. Their claim was if that was allowed to be classified for VAT purposes as a houseboat many cruisers could could also be deemed to be houseboats when sold without an outboard and so having no meens of propulsion!

 

You could ask for clarification of this but it will stir up a can of worms.

 

I refer you to my assumption that there cannot be any VAT on your dwelling.

[Timleech]

You could ask for clarification of this but it will stir up a can of worms.

 

I refer you to my assumption that there cannot be any VAT on your dwelling.

 

If a vessel is exempted purely because it is a dwelling, and would otherwise be subject to VAT, then surely VAT will be due if it ceases to be a dwelling??

 

 

Tim

[Gary Peacock]

You could ask for clarification of this but it will stir up a can of worms.

 

I refer you to my assumption that there cannot be any VAT on your dwelling.

 

I don't think there is much scope on the "Qualifying Ship" side there are things going on in that area regarding VAT tribunal decisions and counter appeals by HMR&C to the courts but I think HMR&C are on fairly safe ground.

 

I suspect on the tug & butty front people will receive demands for unpaid VAT and due process usually goes in favour of HMR&C if you don't agree.

 

The argument for zero rating or at least a element of residential boats is very valid but this requires a change in the VAT law not attempts to find any available loophole!

 

So what does CWF think should the VAT rules on residential boats come into line with buildings and caravans with regard to some form of VAT relief?

 

 

By the way I have been to war with them over this in the past and won, but I now have a much better understanding of how they work and how they like to win. Looking for loopholes is not the way looking for change would be much more worthwhile!

Edited January 18, 2008 by Gary Peacock

[Gary Peacock]

I had a meeting with HMR&C last Friday and discussed the tug butty VAT issue with them.

 

They were not aware of any "green light" being given by them to zero rate the butty in a combination, in fact they did not agree that it could be a houseboat.

 

So if you're thinking along this line to avoid VAT I get the feeling HMR&C are not impressed!

 

So be very very careful not to get burnt I also got the distinct feeling some builders will be getting a visit pretty soon from Mr VAT Man!!!

Edited February 18, 2008 by Gary Peacock

[Yoda]

Told you, can of worms!