Tax on selling boats?

[Paul C]

Presumably, such an enterprise would need somewhere to store the boats while they are for sale, eg a mooring or a marina. I can't imagine marinas will want them, since it would be competition with their existing brokerage; so it looks like online moorings would be the only option. And with a boat not selling quickly, that would soon be a significant drain on finances. Turnaround would be everything. You'd probably also need a way of dry docking or getting boats out the water regularly, depending on the work needed. That's not cheap either.

[Ex- Member]

I've known a few mates in the past getting caught out buying and selling cars, do it too many times and get noticed and the tax man as always will want his cut if profit is involved. In reality any income you glean from anywhere is taxable unless there's some specific exemption.

[leolady too]

I presume you have read what the ex-taxman says?

 

The problem is that where something isn't totally clear-cut, the Revenue's view will prevail because it will be very hard to convince them or a court that you are not trading if the Revenue thinks you are.

 

The mere fact that the OP asked the question confirmed that she was considering this as a money-maker, and therefore as a business.

 

But I fully agree that she should take professional advice before she begins, and I suspect that advice would be not to bother, for reasons of cash-flow and practicality. Boats don't sell instantly, so either she would be hanging around doing nothing while waiting for a boat to sell, or she would have to buy one or two more concurrently in order to keep busy. And that would need serious cash.

I have indeed read what ex-taxman says. It is certainly not true that the mere fact of making a "profit" on one or two transactions means it is certainly a trade. There is much more to be considered than that. It is not an unexpected response from an ex-taxman. I agree that HMRC usually takes the view "If in doubt the answer's "yes", it is taxable". However, I regard part of my role as defending the innocent from the bully boy tactics of some HMRC officers. I usually find that a vigorous defence soon puts off the chancers at HMRC who try to get a quick victory by coming on strong. I cannot therefore agree that the HMRC view prevails where there is doubt. I have to say I love being as aggressive to them as some of them are to some tax payers!

 

All this assumes of course that you have a case to argue. Hence the need for advice, a matter on which everyone agrees.

[Arthur Marshall]

I have indeed read what ex-taxman says. It is certainly not true that the mere fact of making a "profit" on one or two transactions means it is certainly a trade. There is much more to be considered than that. It is not an unexpected response from an ex-taxman. I agree that HMRC usually takes the view "If in doubt the answer's "yes", it is taxable". However, I regard part of my role as defending the innocent from the bully boy tactics of some HMRC officers. I usually find that a vigorous defence soon puts off the chancers at HMRC who try to get a quick victory by coming on strong. I cannot therefore agree that the HMRC view prevails where there is doubt. I have to say I love being as aggressive to them as some of them are to some tax payers!

 

All this assumes of course that you have a case to argue. Hence the need for advice, a matter on which everyone agrees.

I spent twenty odd (some of them very odd) years working for the Revenue, and the next half dozen for an accountant, so I straddle the fence... obviously one or two transactions aren't trade (like selling your old LPs on Ebay), but from what OP said, this does look like an ongoing series of trades. Even if one's hobby is doing up old tubs and then selling to start again, it's still a taxable passtime. You don't get away with it just because it's a hobby - I've been a part time musician for forty years and that gets treated the same.

I would suspect if it is just a hobby, she won't be making any money, so there will be no tax liability, but it still has to be declared to the IR or you're in trouble. Back to the pro advice - my old accountant reckoned if he couldn't save me his fee he wasn't doing his job.

Be interesting to see her response to all this!

[RLWP]

I spent twenty odd (some of them very odd) years working for the Revenue,

 

<snip>

 

a part time musician

 

<snip>

 

 

Richard

[LoneWolf]

 

...

The problem is that where something isn't totally clear-cut, the Revenue's view will prevail because it will be very hard to convince them or a court that you are not trading if the Revenue thinks you are.

...

 

 

bollocks it will. and shame on you as an ex-taxman for making such a ridiculous statement

[RLWP]

bollocks it will. and shame on you as an ex-taxman for making such a ridiculous statement

 

He isn't the ex-lax man, he's just a self-appointed expert. The ex-tax man is Arthur Marshall

 

Richard

[LoneWolf]

He isn't the ex-lax man, he's just a self-appointed expert. The ex-tax man is Arthur Marshall

 

Richard

 

hmm... i thought George was an ex-taxman as well for some reason.

Ridiculous thing to say though

 

Anyone who takes tax advice from an internet forum is a fool in any case unless the advice is "go see an accountant"

 

(smiley added to make me seem less fierce - tax advice is not a funny matter )

[Grace and Favour]

hmm... i thought George was an ex-taxman as well for some reason.

Ridiculous thing to say though

 

Anyone who takes tax advice from an internet forum is a fool in any case unless the advice is "go see an accountant"

 

(smiley added to make me seem less fierce - tax advice is not a funny matter )

 

Tax advice is slightly less unfunny than tax, of course

[George94]

bollocks it will. and shame on you as an ex-taxman for making such a ridiculous statement

 

I am not an ex-taxman. You are confused.

 

Obviously you can fight these things, but that takes time and money, and there is no guarantee that you will win, even if in your opinion you are right.

 

In this case, from what has been said, it would appear that the Revenue will regard this as trading, and will tax any profits. It will be incredibly hard to argue that, if you buy a series of boats, do them up, and sell them at a profit, you are not running a business.

 

And if you think that is bollocks, take professional advice.

[RLWP]

<snip>

 

And if you think that is bollocks, take professional advice.

 

She is a professional adviser

 

Richard

[George94]

She is a professional adviser

 

Richard

 

She is not the only one.

 

And her advice is only "professional" if you are paying for it!

 

I don't disagree with Leolady on her facts, but she appears to be more optimistic than me that this case can be presented as a non-business. Without knowing all the facts, neither of us can be certain - hence the need for professional advice based on ALL the facts.

 

Since I am not pitching for business, I see no need to gloss over the likelihood that the Revenue will treat this as a business, nor to suggest that, without spending time and money, they can be persuaded otherwise.

Edited June 19, 2012 by George94

[RLWP]

She is not the only one.

 

And her advice is only "professional" if you are paying for it!

 

<snip>

 

Your pedantry is very tedious.

 

Richard

[Arthur Brown]

"How many boats a year can I but and sell" sic. Seems a clear indication of intent to trade, therefore appropriate professional advice early is essential.

 

"make minor changes then sell on" put as professional work from a boatworker you would have a liability for your work being of reasonable quality, probably to BSS standard at least.

 

Professional advice may involve other professions as well as accountancy.

 

There may be some truth in the "professional = paid for" argument because you want the advice in writing from someone who is insured to give that advice - usually sharpens their mind to get it right.

 

Google is probably the worst place to look for legal advice and certainly they do not accept liability for what they spider and offer.

[RLWP]

<snip>

 

"make minor changes then sell on" put as professional work from a boatworker you would have a liability for your work being of reasonable quality, probably to BSS standard at least.

 

<snip>

 

This is unlikely. For instance, woodwork, painting, decorating, plumbing, fitting lights - none of these are a part of the BSS

 

Richard

[George94]

Your pedantry is very tedious.

 

Richard

 

Canal World does seem to attract an awful lot of bored, elderly, aggressive, males with nothing better to do than find fault with people.

 

Go out to the pub, old chap, take the boat out, DO something. Don't just sit here oozing negativity.

 

It's rather tedious!

 

[Graham Davis]

As a comparison, I have had 2 friends who have been "caught" by HMRC after buying and selling 6 cars each, in one year. They were "caught" from adverts that they put in the paper and on E-bay. Both were threatened with prosecution if they did not provide full accounts and payment, if due.

I also know of someone who is currently "negotiating" with HMRC about all her (very many) sales of antique and collectable items on E-bay.

[Dominic M]

Trade has nothing to do with it. If you sell anything for a profit it is a declarable capital gain. As long as that gain does not exceed the annual CGT allowance it is not taxable. This applies to the disposal of all assets except your primary residence.

 

Where trade comes into it is that in selling several boats that you own a year, you will be viewed as a trader, and must provide warranties in accordance with consumer law for the goods you sell.

 

If you are trading, then your turnover will also require you to register for VAT if it exceeds the current level of (I think without checking) £78k pa.

Edited June 19, 2012 by Dominic M

[George94]

Trade has nothing to do with it. If you sell anything for a profit it is a declarable capital gain. As long as that gain does not exceed the annual CGT allowance it is not taxable. This applies to the disposal of all assets except your primary residence.

 

Where trade comes into it is that in selling several boats that you own a year, you will be viewed as a trader, and must provide warranties in accordance with consumer law for the goods you sell.

 

Sorry, Dominic, but trade has everything to do with it.

 

If you buy a car for your business, it is a capital item for YOU, as the buyer, but not for the seller (assuming he buys and sells cars by way of business).

 

For the seller, it's a stock item, just like a packet of fags for a tobacconist.

 

In this case, it appears that the OP is planning to buy, do up, and sell boats to make money. That is trading.

[Arthur Brown]

This is unlikely. For instance, woodwork, painting, decorating, plumbing, fitting lights - none of these are a part of the BSS

 

Richard

 

As a trader selling boats to consumers then you have the full responsibility for all the warranty issues, if there has been work on the gas or stove then there is also a possibility of BSS involvement.

 

HMRC and current accountancy practise recognise that people will occasionally sell something of their own when they no longer wish to have it -eg kids bike as kid grows up. HOWEVER HMRC and trading standards will start to notice sequential sales from the same person, phone number etc.

[Ange]

Canal World does seem to attract an awful lot of bored, elderly, aggressive, males with nothing better to do than find fault with people.

 

Go out to the pub, old chap, take the boat out, DO something. Don't just sit here oozing negativity.

 

It's rather tedious!

 

 

Gosh I think this post rather proves that you can be tedious at any age! Go to the pub and spare us your idiocy!

 

ETA now giggling at the idea that I may be described as elderly for disagreeing with Mr Young and therefore Clever

 

Oh and btw Richard didn't "ooze negativity" - he just pointed out your failings! Learn to deal with that and maybe, heaven forbid, learn from it! You're clearly applying logic to the tax rules. As a chartered accountant I can assure you that I was shocked when I studied tax -there is nothing logical or obvious about the rules.

 

You're making a bit of a tit of yourself and I'd stop digging that hole if I were you,

 

Now eagerly awaiting George to consign me to my bath chair where I clearly belong

Edited June 20, 2012 by Ange

[leolady too]

Trade has nothing to do with it. If you sell anything for a profit it is a declarable capital gain. As long as that gain does not exceed the annual CGT allowance it is not taxable. This applies to the disposal of all assets except your primary residence.

 

Where trade comes into it is that in selling several boats that you own a year, you will be viewed as a trader, and must provide warranties in accordance with consumer law for the goods you sell.

 

If you are trading, then your turnover will also require you to register for VAT if it exceeds the current level of (I think without checking) £78k pa.

Except, of course, tangible moveable property bought and sold for less than £6,000 which is exempt from CGT as is tangible moveable property which is a wasting asset, no matter what the proceeds, unless it has been subject to capital allowances.Boats are generally exempt except for "yachts, barges or boats used as a residence which may have a useful life of more than 50 years". There are other things too, cars, decorations for valour, insurance policies etc. As I said, this is complicated and professional advice is necessary. Whether I get paid for it or not, my professional body holds me liable, and I'm sure a court would too.

 

Just for clarity and not to criticise, the current VAT registration threshold is £77000.

 

I suppose my complaint, if I had one in all this, is the certainty with which some who have commented express their views on the basis of very limited information in the original post. That and what seems like a reluctance to resist HMRC when there is a case to argue.

Edited June 20, 2012 by leolady too

[leolady too]

You're clearly applying logic to the tax rules. As a chartered accountant I can assure you that I was shocked when I studied tax -there is nothing logical or obvious about the rules.

 

 

When training I was taught the maxim "There is no Equity in Tax". This is a bitter pill to swallow. It means that there is no appeal to any sense of fairness/sense of right and wrong (equity) in tax law. One must accept the law as it is whether fair or not and the courts can only apply it. I've always interpreted the maxim to mean that tax law isn't even meant to be fair, it is just what it is.

[Albion]

My experience over many years of running my own small business and once after HMRC threatened to open an investigation when they couldn't (didn't want to) understand a very simple change in the method that I paid my mortgage was that in their eyes you are guilty until you prove your innocence (the opposite of normal law). They are free to make any allegations they want to and you have to prove that their allegations are false. It was once described to me as 'shaking the trees to see how many apples fall'.

It is perfectly correct that, with the assistance of a good accountant and good paperwork, you can fight them off as I managed to do but they often seem to work on the premise that if they make your life difficult enough that you will cave in and ask them how much they want to just get off your back whether that amount is correct or not. I've known other small businessmen who, after days of interviews away from their business, just gave in and settled as it was costing too much in lost trade to be away from the business .

Roger

[leolady too]

My experience over many years of running my own small business and once after HMRC threatened to open an investigation when they couldn't (didn't want to) understand a very simple change in the method that I paid my mortgage was that in their eyes you are guilty until you prove your innocence (the opposite of normal law). They are free to make any allegations they want to and you have to prove that their allegations are false. It was once described to me as 'shaking the trees to see how many apples fall'.

It is perfectly correct that, with the assistance of a good accountant and good paperwork, you can fight them off as I managed to do but they often seem to work on the premise that if they make your life difficult enough that you will cave in and ask them how much they want to just get off your back whether that amount is correct or not. I've known other small businessmen who, after days of interviews away from their business, just gave in and settled as it was costing too much in lost trade to be away from the business .

Roger

All that is absolutely true and is why I get such satisfaction from defending people. It is true to say that if your accountant is difficult, unco-operative, arguementative and unyeilding with HMRC, they are much more liekly to leave you alone and pick on someone who's accountant is pleasant helpful and co-operative with them. These days HMRC staff are target driven and the last thing they want is an accountant who won't stick to their (entirely arbitrary and unrealistic) times for giving replies and who argues every point. What they want is someone who caves in early so they get their results and meet their targets.