VAT

[Glennbrown]

Readers may be aware following a VAT ruling owners can now claim the VAT back on residential boat as long as they are a qualifying vessel, following a recent decision by the High Court!

 

A friend of mine purchased a wide beam boat 2 years ago which now qualifies under the Vat rules. She paid for the boat with VAT since the boat builder would not (quite rightly at the time) sell her the boat vat free!

 

The boat builder has now ceased trading and vanished. The Vat notes enclosed below state that she can now claim back the vat she paid the builder but since he has disappeared

and that you cannot claim vat back direct from Customs and Excise leaves her will nobody to claim the vat from!

 

Anybody any ideas?

 

VAT ON BOATS Background

 

'Qualifying ships' - are zero-rated for VAT purposes. A 'qualifying ship' is defined as a ship which is not less than 15 gross tons and is neither designed nor adapted for use for recreation or pleasure. The law is set out in the Value Added Tax Act 1995, Schedule 8, Group 8, Item 1 and legal note A1(a).

 

'Houseboats' - are covered by a separate zero-rate. For VAT purposes, 'houseboats' are boats designed as living accommodation that do not have, and cannot be fitted with, a means of propulsion. If a boat can be fitted with a means of propulsion, it is not a 'houseboat'. The law is set out in the Value Added Tax Act 1995, Schedule 8, Group 9, Item 2.

 

HM Revenue & Customs (HMRC) policy

In the light of the High Court decision in the case of Lt Cmdr Colin Stone [2008] EWHC 1249 (Ch), HMRC are changing their long-standing policy on the liability of vessels used as residential accommodation, excluding houseboats, for VAT purposes. This case concerned the VAT liability of the supply of 'Dutch barges' acquired for the purpose of being used as a permanent residence.

 

The High Court decided that the supply of the vessel was entitled to zero-rating under the terms of UK law, because it was designed to be lived in as a permanent home and, therefore, not designed for use as recreation or pleasure.

 

HMRC consider that many of these and similar vessels, although designed for use as a permanent residence, can also be designed for use as recreation or pleasure and are perfectly capable of being so used. It was never the intention that UK legislation should provide for the supply of such vessels to benefit from zero-rating but, following Tribunal and Court decisions over time, HMRC have found it increasingly difficult to apply a consistent and coherent policy around the borderlines in this area.

 

HMRC do not rule out a wider review of policy and legislation in this area. However, in the meantime, we have decided to treat Dutch barges and similar vessels that are designed and supplied for use as the permanent residence of the customer as qualifying ships and eligible for zero-rating. As vessels of less than 15 gross tons can never be zero-rated regardless of their design, the majority of narrow boats designed for permanent residential use will not meet this requirement and their supply will continue to be standard-rated.

 

As a result of this policy change some supplies of goods and services to the owners of such vessels may also be zero-rated by suppliers.

 

These include:

 

repairs and maintenance of the vessel itself; this does not extend to the domestic equipment and fittings on board

modification or conversion of the vessel itself provided that it remains a qualifying ship after modification or conversion; this does not extend to domestic equipment and fittings

parts and equipment ordinarily installed or incorporated in the propulsion, navigation, communications or structure of a ship; this does not extend to domestic equipment and fittings

Further details can be found in Notice 744C.

 

Evidence of intention

In keeping with normal rules, suppliers will have to hold evidence to satisfy HMRC that the supply is entitled to zero-rating. This may be in the form of contractual or other documentary evidence. HMRC would also advise suppliers to obtain a declaration from their customers that the vessel is to be designed for use as a permanent residence and intended for such use. We would suggest that suppliers use the format set out for the Undertaking of Use in Notice 744C, adapted as necessary where the supply is one of the vessel itself. Customers should be aware that HMRC have powers to impose penalties where false documentation is used to obtain a tax advantage.

 

Past supplies and claims

Customers who have been previously charged VAT on a supply that is now covered by this policy must approach the person who made the supply to them to obtain a refund of VAT. They should not contact HMRC as we have no legal powers to refund tax direct to customers. Suppliers who wish to claim a refund of VAT charged to customers on a supply covered by this policy must submit their claims in accordance with the published rules and subject to the normal repayment, unjust enrichment and capping criteria to HMRC.

Edited March 4, 2010 by Glennbrown

[Grace and Favour]

Glenn, I have a sneaking suspicion that your friend may well be unable to recover the VAT, unless the Builder's business is still not officially liquidated. or wound up, in which case there's an outside chance of success IF your client is able to identify, contact, and persuade the accountants of said business to be of assistance

[Glennbrown]

Dear G and F- thanks for that and thought that might be the case!

 

Seems very unfair since the Vat people have had her money(via the seller) and hide behind the fact that you have to

make a claim against the supplier!

 

The supplier would not sell her the boat vat free due to the vat offices ruling at the time!

 

Stinks to be honest!

Edited March 4, 2010 by Glennbrown

[blackrose]

VAT ON BOATS Background

 

'Qualifying ships' - are zero-rated for VAT purposes. A 'qualifying ship' is defined as a ship which is not less than 15 gross tons and is neither designed nor adapted for use for recreation or pleasure. The law is set out in the Value Added Tax Act 1995, Schedule 8, Group 8, Item 1 and legal note A1(a).

 

I had a look at this ruling for my 57' x 12' boat which is around 32 tonnes, but using the HMRC method of calculation it came out at about 12 tonnes so it doesn't qualify.

 

Recreation or pleasure is another area where I think most of us would have a problem trying to claim VAT back.

[Grace and Favour]

Dear G and F- thanks for that and thought that might be the case!

 

Seems very unfair since the Vat people have had her money(via the seller) and hide behind the fact that you have to

make a claim against the supplier!

 

The supplier would not sell her the boat vat free due to the vat offices ruling at the time!

 

Stinks to be honest!

Well =- no - I suspect that HMC&E may not have had the VAT - becauseif the builder had wound-up the biz - they may not have been paid, similarly the builder may have used otherVAT 'expenditure / losses' to counter it (or whatever the official term is) - it's the Builder whom initially received her VAT dues

[howardang]

Dear G and F- thanks for that and thought that might be the case!

 

Seems very unfair since the Vat people have had her money(via the seller) and hide behind the fact that you have to

make a claim against the supplier!

 

The supplier would not sell her the boat vat free due to the vat offices ruling at the time!

 

Stinks to be honest!

Glenn, I would also double check that the boat in question does actually comply with the 15 ton gross tonnage requirement.

 

Howard

[mayalld]

Readers may be aware following a VAT ruling owners can now claim the VAT back on residential boat as long as they are a qualifying vessel, following a recent decision by the High Court!

 

A friend of mine purchased a wide beam boat 2 years ago which now qualifies under the Vat rules. She paid for the boat with VAT since the boat builder would not (quite rightly at the time) sell her the boat vat free!

 

The boat builder has now ceased trading and vanished. The Vat notes enclosed below state that she can now claim back the vat she paid the builder but since he has disappeared

and that you cannot claim vat back direct from Customs and Excise leaves her will nobody to claim the vat from!

 

Anybody any ideas?

 

Have you asked HMRC?

[Glennbrown]

Dear Gand F-point taken but the builder only recently went broke so I would like to presume the VAT office had

the benefit of the vat on the boat and paid by my friend.(she paid for it two years ago!)

 

Yes I did ask HMCR but they refered me to the notes which are in my original posting ie vat can only be recovered from the supplier!

Edited March 4, 2010 by Glennbrown

[magpie patrick]

I had a look at this ruling for my 57' x 12' boat which is around 32 tonnes, but using the HMRC method of calculation it came out at about 12 tonnes so it doesn't qualify.

 

Now, I knew they could make the rules to suit themselves but that seems to be pushing it a bit

 

Next thing I know my car will be officially an HGV, and the house will have grown five bedrooms and a moat for the council tax assessment

[howardang]

Now, I knew they could make the rules to suit themselves but that seems to be pushing it a bit

 

Next thing I know my car will be officially an HGV, and the house will have grown five bedrooms and a moat for the council tax assessment

The confusion lies in the term Gross tonnage which is a measure of volume and has nothing to do with the displacement of the boat. That's why I suggested that a double check of the tonnage in this case might be appropriate because I suspect that the gross tognnage of the boat talekd about will be much less than 15 gross tons.

 

 

 

Howard

[blackrose]

Now, I knew they could make the rules to suit themselves but that seems to be pushing it a bit

 

Next thing I know my car will be officially an HGV, and the house will have grown five bedrooms and a moat for the council tax assessment

 

Here's the method of calculation:

 

2.10 How is the gross tonnage of a ship calculated?

The gross tonnage of a ship is as ascertained under the Merchant Shipping Acts. If the gross tonnage of a ship has not been calculated under the Merchant Shipping Acts you should read paragraph 2.11. As soon as the tonnage of a vessel is ascertained under the Merchant Shipping Acts that tonnage becomes the basis for determination of VAT liability and the tonnage arrived at by the formula in paragraph 2.11 will no longer apply.

 

Hovercraft are not subject to the gross tonnage criteria and are therefore regarded as qualifying ships unless they are designed or adapted for use for recreation or pleasure.

 

2.11 How do I calculate the gross tonnage of unregistered ships?

Where the gross tonnage of a ship has not been calculated under the Merchant Shipping Acts it is to be determined for the purposes of VAT only by the following formula:

 

For vessels 24 metres or greater in length:

 

L(m) x B(m) x D(m) x 0.235

 

For vessels less than 24 metres in length:

 

L(m) x B(m) x D(m) x 0.16

 

Where:

 

L = Length measured from foreside of the foremost fixed permanent structure to the afterside of the aftermost permanent structure. This measurement must not include appendages that do not contribute to the volume of the vessel.

 

B = Beam – breadth of vessel at widest part to the outside of outer planking. This measurement must not include the thickness of any moulding or rubbing strake which may be fitted, in way of such measurement.

 

D = Depth measured vertically from the midpoint overall.

 

The upper calculation point will be:

for a decked vessel - the underside of the deck on the middle line, or (if there is no deck on the middle line) the underside of the deck at the side of the vessel.

for an open decked vessel – the top of the upper strake or gunwale.

 

The lower calculation point will be:

for a wooden vessel – the upper side of the plank at the side of the keel.

for a metal vessel – the top of the plating at the side of the keelson.

for a moulded vessel (for example one made of glass-reinforced plastic) – the inside of the hull. Where no keel member is fitted and the keel is of open trough construction, the calculation point shall be the top of the keel filling, if fitted, or the level at which the inside breadth of the trough is 10 centimetres – whichever gives the greater depth.

 

2.12 What about calculating the gross tonnage of multi-hulls or narrowboats?

For multi-hull vessels, each hull must be measured separately for overall length, beam and depth and the vessel as a whole must be measured.

 

For narrowboats, the measurement must be taken from the underside of the deck at the side of the vessel, rather than from the roof of the cabin.

 

I think it's this method of calculating depth which causes the confusion - I'm reading it as gunwhale height to baseplate (or perhaps midway between the two for a NB style widebeam or barge?)

 

And here's a link to the full document:

 

http://customs.hmrc.gov.uk/channelsPortalW...cument#P70_4323

Edited March 4, 2010 by blackrose

[colin stone]

Gross tonnage is, as has been pointed out a, volume calculation rather than displacement. It is derived from barrels of port, more correctly tuns of port. The tunnage was the number of barrels a vessel could carry. Vessels under 24m carry less barrels as the intrusions of machinery spaces and accom areas is a greater proportion that vessels over 24m.

 

The measurement point for depth is indeed the gunwhale and the midpoint. The gunwhale is part of the continuous upper deck. Below the gunwhale the hull is determined to be watertight, above only weathertight. The SI has the full explanation of upper decks etc.

 

A 57ft x 12ft x 5ft just makes the 15 tons - so high sided hulls are the order of the day!!!!

Edited March 4, 2010 by colin stone