VAT on licence?

[nomad - tuttle hill]

When renew are Boat Licence we are charge vat on the yearly fee ! but you don't pay vat on your Car tax or other waterways Licence?

 

why do we have to pay Vat? This was added by BW and CRT carry it on.

 

thinking about it we don't pay vat on car licence , so how can CRT so it for a service for boaters?

 

Boats - locks , tunnels and towpaths ect - charge vat 20 %

Cars - roads , traffic lights and roundabouts ect - no vat charge!

 

other waterways ie River Avon no vat

 

Any thoughts ?

[Raz]

There appears to be some reasonable answers here from 2013.

 

http://www.canalworld.net/forums/index.php?showtopic=53349

 

Something along the lines of if you are not VAT registered, then you can't claim the VAT back on the materials used in the upkeep of the canals - can cost up to £20 million annually in lost reclaims..

 

If you are registered for VAT to reclaim it as above, then you must also charge VAT on the goods and services you provide, if annual turnover is above a certain threshold.

 

The EA has a special exemption from getting involved in VAT.

 

BW also tried to apply for this exemption years ago, but were refused by the government. C&RT decided to maintain the VAT aspect as BW chose to work it when they took over.

 

Apparently a boat license is not a tax in the same way as say a vehicle excise license. It is a charge to use the services and facilities of C&RT which in turn is used to partially fund the upkeep of the system. I would say that aspect of road tax and maintenance disappeared years ago, and the revenue from road tax is now used for anything but.

[Southern Star]

 

 

 

 

If you are registered for VAT to reclaim it as above, then you must also charge VAT on the goods and services you provide, if annual turnover is above a certain threshold.

 

 

I'm registered for VAT, and I do push it to the limit, but I think I'd be hard pushed to persuade HMRC that I needed a canal licence as a legitimate part of my business of running a road haulage company.

[Graham Davis]

Car VEHICLE EXCISE DUTY is not a licence.

 

The 2 are not comparable,

[mayalld]

When renew are Boat Licence we are charge vat on the yearly fee ! but you don't pay vat on your Car tax or other waterways Licence?

 

why do we have to pay Vat? This was added by BW and CRT carry it on.

 

thinking about it we don't pay vat on car licence , so how can CRT so it for a service for boaters?

 

Boats - locks , tunnels and towpaths ect - charge vat 20 %

Cars - roads , traffic lights and roundabouts ect - no vat charge!

 

other waterways ie River Avon no vat

 

Any thoughts ?

Basically, making licences liable for VAT means that they can claim back input VAT on supplies.

 

If they didn't charge VAT they couldn't do that so all the things they buy would cost more, and they would have to increase the cost of a licence

[Southern Star]

Basically, making licences liable for VAT means that they can claim back input VAT on supplies.

 

If they didn't charge VAT they couldn't do that so all the things they buy would cost more, and they would have to increase the cost of a licence

Theoretically, CRT licences could be zero-rated for VAT though. This is what bus companies do, they don't charge VAT on fares, but they can reclaim the cost of VAT paid for diesel, bus repairs etc, so every three months they get a humungous rebate cheque from HMRC through the post.

 

Haulage companies can't do this, and that's why Ann Gloag is rich and I am poor.

[NigelMoore]

Theoretically, CRT licences could be zero-rated for VAT though. This is what bus companies do, they don't charge VAT on fares, but they can reclaim the cost of VAT paid for diesel, bus repairs etc, so every three months they get a humungous rebate cheque from HMRC through the post.

 

Absolutely. Once registered for VAT you don't need ever to charge VAT for VAT exempt or zero-rated services, in order to qualify for rebates on all VAT paid on the expenses of providing the services.

 

BW/CaRT always inform the courts that there would be no VAT applicable on any costs orders, for example, precisely because they are VAT registered.

[Jerra]

 

Absolutely. Once registered for VAT you don't need ever to charge VAT for VAT exempt or zero-rated services, in order to qualify for rebates on all VAT paid on the expenses of providing the services.

 

BW/CaRT always inform the courts that there would be no VAT applicable on any costs orders, for example, precisely because they are VAT registered.

Which of the tax exempt categories would the license fall into(If people think it should be exempt)? Personally I can't fit it into any tax exempt category but then it is Saturday night so I might not be thinking on top form.

[NigelMoore]

I wouldn’t have the faintest idea myself; I’ve stopped following the intricacies of VAT calculations and content myself with just claiming it back despite no longer charging [except on rare occasions].

 

I was simply responding to the suggestion that unless you charged VAT on supplies, you could not reclaim it on purchases.

[Jerra]

I wouldn’t have the faintest idea myself; I’ve stopped following the intricacies of VAT calculations and content myself with just claiming it back despite no longer charging [except on rare occasions].

 

I was simply responding to the suggestion that unless you charged VAT on supplies, you could not reclaim it on purchases.

 

Sorry Nigel I should have made it clear it was a general question to those who think VAT should not apply to the license.

[cotswoldsman]

Theoretically, CRT licences could be zero-rated for VAT though. This is what bus companies do, they don't charge VAT on fares, but they can reclaim the cost of VAT paid for diesel, bus repairs etc, so every three months they get a humungous rebate cheque from HMRC through the post.

 

Haulage companies can't do this, and that's why Ann Gloag is rich and I am poor.

Public transport is zero rated for vat so not quite sure what that has to do with a licence for a boat.

[rgreg]

 

Absolutely. Once registered for VAT you don't need ever to charge VAT for VAT exempt or zero-rated services, in order to qualify for rebates on all VAT paid on the expenses of providing the services.

 

BW/CaRT always inform the courts that there would be no VAT applicable on any costs orders, for example, precisely because they are VAT registered.

Not entirely correct; you can't generally claim VAT back on expenses relating to the supply of VAT exempt goods. You can though for those expenses relating to the supply of VAT zero rated goods.If you sell both zero rated and exempt goods you are classed as "partially exempt" and must apportion your expenses accordingly.

[NigelMoore]

Not entirely correct; you can't generally claim VAT back on expenses relating to the supply of VAT exempt goods. You can though for those expenses relating to the supply of VAT zero rated goods.

 

Thanks for that clarification. We only deal with zero-rated items such as houseboats; I have never quite grasped what the essential difference is between that and exempt goods!

[rgreg]

 

Thanks for that clarification. We only deal with zero-rated items such as houseboats; I have never quite grasped what the essential difference is between that and exempt goods!

The essential difference is that zero rated goods are eligible for VAT but the UK government has chosen to apply a zero rate to them; this can be changed in any budget. Exempt goods are as the term implies; they fall outside the scope of VAT.

[LoneWolf]

Public transport is zero rated for vat so not quite sure what that has to do with a licence for a boat.

 

I can tell you. It has nothing to do with a licence for a boat and anyone who says it does is only showing their ignorance on VAT matters.

 

 

The essential difference is that zero rated goods are eligible for VAT but the UK government has chosen to apply a zero rate to them; this can be changed in any budget. Exempt goods are as the term implies; they fall outside the scope of VAT.

 

Spot on in your previous posts but, to be pedantic, 'outside the scope' and 'exempt' are actually different things eg outside the scope will not be taken into account in your partial exemption calculation

[Machpoint005]

Car VEHICLE EXCISE DUTY is not a licence.

 

The 2 are not comparable,

 

Oh no Graham, you've squashed yet another fruitless argument with a fact!

 

 

 

 

(well done sir)

[rgreg]

 

 

 

Spot on in your previous posts but, to be pedantic, 'outside the scope' and 'exempt' are actually different things eg outside the scope will not be taken into account in your partial exemption calculation

Ok, perhaps not the best choice of wording but I was trying to phrase exemption in a different way, i.e. it does not attract VAT, but yes of course it will be taken into account in the partial exemption calculation.

[Mike Todd]

Theoretically, CRT licences could be zero-rated for VAT though. This is what bus companies do, they don't charge VAT on fares, but they can reclaim the cost of VAT paid for diesel, bus repairs etc, so every three months they get a humungous rebate cheque from HMRC through the post.

 

Haulage companies can't do this, and that's why Ann Gloag is rich and I am poor.

I thought that on-going VAT rebates were abolished a long time ago

[furnessvale]

I thought that on-going VAT rebates were abolished a long time ago

Not sure how that would work.

 

Buying in gas oil in more than 2300litre lots incurs VAT at 20%. Selling it out again in penny packets incurs VAT at 5% meaning the taxman always owes you money.

 

George ex nb Alton retired

[Machpoint005]

Not sure how that would work.

 

Buying in gas oil in more than 2300litre lots incurs VAT at 20%. Selling it out again in penny packets incurs VAT at 5% meaning the taxman always owes you money.

 

George ex nb Alton retired

 

Does that now effectively mean it's up to the retailer to recover the difference from his customers by increasing the retail price (not the tax element)?

[Idunhoe]

A bit of on line research came up with this from last year

 

 

VAT – Boats and boating

Why does the Canal & River Trust charge VAT on boat licences?

Firstly it is important to understand how VAT applies to a business. The Trust is required by legislation to be registered for VAT. If you are registered for VAT you must charge VAT on all of your supplies where the law requires it.

A VAT registered business regularly completes a VAT return in which it pays to HM Revenue & Customs all of the VAT it has collected from customers and reclaims all of the VAT it has incurred on goods and services it has acquired.

However it is only possible to reclaim any VAT incurred if the VAT can be attributed to taxable business activities. The majority of all expenditure on the general maintenance and major repairs of the canal infrastructure includes VAT.

Prior to 1989 British Waterways (BW) did not charge VAT on its boat licences and as a result was unable to recover VAT on its general repairs and maintenance of the canals.

In 1989 BW opted to charge VAT on its property including canals to enable it to generate taxable activities (including charging VAT on the boat licence) on the canals, which in turn enabled BW to recover the VAT incurred on general maintenance and refurbishment.

At the time BW did not increase the overall cost of the boat licence to the customer. If for example the licence at the time cost £300, after BW opted to charge VAT the licence still cost £300 (£255+ £45 VAT). In other words this cost was not passed on to BW’s customers.

The Trust has continued to apply the same options to charge VAT.

Without this option to charge VAT on the boat licence, at today’s level of expenditure on the canal infrastructure, the Trust would be losing up to £20 million per annum in lost VAT on the general and major repairs, and the price of the boat licence and other income streams would need to be increased by a significant amount to offset this loss.

 

Why the boat licence is not a tax

The boat licence is not a tax in same way that the road fund licence or TV licence is levied. In addition to permission to navigate our waterways, the Trust provides other facilities along the network which are available only to licence holders. These include places to take on clean water, sanitary and waste disposal facilities, shower blocks, etc. No additional charge is made for these services, although a deposit is taken for the entrance key; it is classed as a supply of goods and services for the purposes of VAT. This contributes towards the cost of caring for the waterways. Without this, we could not dredge the canals; keep the locks in order; the tunnels safe; and all the other things you would reasonably expect from a navigation authority.

 

Why doesn’t the Environment Agency charge VAT on their Boat Licence

The EA has a special exemption in VAT legislation that allows them to reclaim the VAT suffered on work carried out on their waterways. This means it does not need to make the same election as the Trust. Many years ago a BW request to HM Treasury for BW to have the same special exemption as the EA was rejected. This is why the VAT position for the two licences is different between the two authorities