Finance - zero VAT for liveaboards

[eco-boat]

I'm not sure this topic is in the right place but I'll move it if not.

I've just purchased a new sailaway liveaboard boat. It is zero rated for VAT.

 

I am now constructing a list of items that I can ask my boat builder to buy and include in the sale. If I do this, I can get theses items also zero rated for VAT (if they qualify, i.e. no white goods).

 

This shopping list is getting very long and I'm expecting my boat builder to eventually say 'no' to some or all of it.

 

Does anyone have any experience of dealing with HMRC on the topic of VAT zero rating for liveaboards? Would it be possible for me to purchase these items and then claim the VAT back from HMRC myself?

 

     Mark

[Alan de Enfield]

There are very very very few Narrowboats that qualify for Zero rated VAT - make sure you get full legal protection from your hull supplier.

 

There was a hull supplier that declared 'Zero-Rating' (which made his boats 20% cheaper than his competitors) and he included a small detail in the small print of the purchase contract that if it was later found that they were not zero rated then the purchaser would take full responsibility for the repayment of VAT + Interest to the HMRCE.

 

There were quite a few buyers who were not happy to get a bill from HMRCE for £30,000 + 

 

A few widebeams do actually qualify for Zero VAT rating but that is NOT because they are liveaboards but because they meet the dimensional requirements.

 

Read section 2:10 and 2:11 to make sure yours qualifies - if it doesn't get back onto your builder for an explanation.

 

https://www.gov.uk/guidance/ships-aircraft-and-associated-services-notice-744c

 

Good luck

Edited July 23, 2018 by Alan de Enfield

[eco-boat]

My boat does qualify for zero VAT. My question is whether I can purchase fit-out materials myself and claim the VAT back myself, or must I go through the boat builder.

Regards,

     Mark

[Graham Davis]

12 minutes ago, eco-boat said:

My boat does qualify for zero VAT. My question is whether I can purchase fit-out materials myself and claim the VAT back myself, or must I go through the boat builder.

Regards,

     Mark

Who has told you it is zero rated for VAT? What official evidence has been provided? If it is just the boatyards say-so I would be very suspicious.
As has been said, I find it very unusual that a narrow boat would be so, as it gets no-where near the criteria required.

And my understanding is that unless you are VAT registered personally then you can't claim the VAT back yourself.

[eco-boat]

I think I've found the answer.

This paragraph is in notice 744

4.3 What’s treated as part of a supply of a ship or aircraft

Normal fixed and loose equipment and furnishings necessary for the operation, navigation or safety, are treated as part of the supply of a ship or aircraft if supplied with it under the same contract. An initial normal complement of on-board spares is treated in the same way.

 

If I try claim back VAT on my own purchases, if won't be the 'same contract', so I must go through my boat builder.

 

Mark

[OldGoat]

There was a scheme for house building - but it was very tortuous. I doubt whether it still exists. Thus whether it (or the logic) could be extended to boats is problematic.

For the boat builder to claim your parts he would have to buy and supply them to you - which he may well not be prepared to do...

[Bricksh]

45 minutes ago, eco-boat said:

My boat does qualify for zero VAT. My question is whether I can purchase fit-out materials myself and claim the VAT back myself, or must I go through the boat builder.

Regards,

     Mark

If it does and please check as it could be expensive later

 

Talk to the equipment suppliers and ask them to supply at zero rate VAT quoting HMRC 744C. They will usually then require a declaration from yourself for evidence that it does indeed comply (qualifying weight from the HMRC calculation NOTE deck height is for the side deck ie gunnel and the top deck cannot be used)  and an indemnifying rider that should HMRC decide that zero VAT does not apply you will pay the VAT such that the supplier is not liable

[Graham Davis]

9 hours ago, eco-boat said:

I think I've found the answer.

This paragraph is in notice 744

4.3 What’s treated as part of a supply of a ship or aircraft

Normal fixed and loose equipment and furnishings necessary for the operation, navigation or safety, are treated as part of the supply of a ship or aircraft if supplied with it under the same contract. An initial normal complement of on-board spares is treated in the same way.

 

If I try claim back VAT on my own purchases, if won't be the 'same contract', so I must go through my boat builder.

 

Mark

Before you get too excited I suggest you read Section 2.2 et seq from that Notice.
I would also get written confirmation from the VAT Inspectorate, because if they find you have presumed exception they will hit you and hit you HARD!

 

https://www.gov.uk/guidance/ships-aircraft-and-associated-services-notice-744c#ships-and-qualifying-ships

 

 

Edited July 23, 2018 by Graham Davis

[zenataomm]

HMRCE are not people to trifle with.

They have more powers than the Police and can enter your property at any time, with no warning and shutting down your life in the process.  Their rulings are not negotiable neither are their decisions.

 

Instead of seeking answers on here you really should be either talking to them direct or listening to your project manager who needs to be an expert in these matters.  Taking extracts from The HMRCE website and trying to interpret their significance to you, while being out of context with everything else written down is a prime recipe for much wailing of teeth and gnashing of hair. Perhaps not this year or next but way into the future, and what about when you come to sell it?  I wouldn't be comfortable with your explanation that it was exempt.

 

Saying, when I read it I understood it to mean, and well I asked on a forum, and some said it was ok, just won't cut it.

 

These are not the people to try and find a way round, and before you say you're not, then why aren't you doing it properly and talking to them? Or have you already but didn't like the answers you got?

[BruceinSanity]

9 hours ago, zenataomm said:

HMRCE are not people to trifle with.

They have more powers than the Police and can enter your property at any time, with no warning and shutting down your life in the process.  Their rulings are not negotiable neither are their decisions.

 

Instead of seeking answers on here you really should be either talking to them direct or listening to your project manager who needs to be an expert in these matters.  Taking extracts from The HMRCE website and trying to interpret their significance to you, while being out of context with everything else written down is a prime recipe for much wailing of teeth and gnashing of hair. Perhaps not this year or next but way into the future, and what about when you come to sell it?  I wouldn't be comfortable with your explanation that it was exempt.

 

Saying, when I read it I understood it to mean, and well I asked on a forum, and some said it was ok, just won't cut it.

 

These are not the people to try and find a way round, and before you say you're not, then why aren't you doing it properly and talking to them? Or have you already but didn't like the answers you got?

This, in spades^^^. And get any rulings in writing, don't rely on on a phone call with the help line. Furthermore, some brokers are now requiring proof of VAT paid before they'll put the boat on brokerage.

 

The OP hasn't told us why he believes his boat is zero rated, which makes me suspicious. Is it a wide beam, for a start, which makes it at least possible.

[WotEver]

1 hour ago, BruceinSanity said:

The OP hasn't told us why he believes his boat is zero rated,

OP hasn’t been back here for a day. 

[mayalld]

22 hours ago, eco-boat said:

My boat does qualify for zero VAT. My question is whether I can purchase fit-out materials myself and claim the VAT back myself, or must I go through the boat builder.

Regards,

     Mark

Unless you are VAT registered, you can't reclaim VAT

[BruceinSanity]

1 hour ago, WotEver said:

OP hasn’t been back here for a day. 

Not an unusual pattern – OP asks question and either doesn't get the answer they wanted or we say "it's a bit more complicated than that" and the OP disappears. I honestly don't think we were being especially fierce about it, this time at least.

[MtB]

3 hours ago, BruceinSanity said:

Furthermore, some brokers are now requiring proof of VAT paid before they'll put the boat on brokerage.

 

 

^^^this^^^

 

There is no way I’d risk buy a boat that I suspected had been built on a zero vat basis, for fear of getting the vat bill. Brokers probably find most buyers think similarly so find them impossible to sell. 

 

Thus consequently totally hammers the second hand value of such boats. Possibly explains why that high-gunwaled Widebeam called Honey Street hung around on the market so long despite being competitively priced two or three years ago. 

[RLWP]

The OP's Blog: http://off-grid-on-boat.blogspot.com/2012/11/finances-taxes-costs-and-other-money.html

 

http://off-grid-on-boat.blogspot.com/

 

Richard

[GUMPY]

Parglena is a qualifying ship and as such provided the supplier was savvy I got a lot of stuff at 0%, heating, blacking,docking, engine parts etc. Oh and she sold within a day of going live on the brokers website.

IMO most widebeams don't qualify as you need at least 5ft between base plate and gunwale......

[bizzard]

Vietnam legistered.

[BruceinSanity]

1 hour ago, Mike the Boilerman said:

 

^^^this^^^

 

There is no way I’d risk buy a boat that I suspected had been built on a zero vat basis, for fear of getting the vat bill. Brokers probably find most buyers think similarly so find them impossible to sell. 

 

Thus consequently totally hammers the second hand value of such boats. Possibly explains why that high-gunwaled Widebeam called Honey Street hung around on the market so long despite being competitively priced two or three years ago. 

From the blog post, looks like he's just scraped into the zero VAT category. I'd still want written conformation from HMRC that he's got his sums right.  It's going to be a total one off eco-boat anyway, so pretty well unsaleable on the ordinary market.

[GUMPY]

If its not a "qualifying ship" then its not the end user HMRC would go after but the supplier, as they supplied it with the wrong rate of VAT applied.

[BruceinSanity]

27 minutes ago, Loddon said:

If its not a "qualifying ship" then its not the end user HMRC would go after but the supplier, as they supplied it with the wrong rate of VAT applied.

But we know of cases in the past where the Revenue has gone after the owner, I think because the supplier had ceased trading. Hence the brokerages concern about proof of VAT paid.

[zenataomm]

41 minutes ago, Loddon said:

If its not a "qualifying ship" then its not the end user HMRC would go after but the supplier, as they supplied it with the wrong rate of VAT applied.

You only have to do a search on Google and then enjoy reading the real life cases therein to realise your view (although it should be that simple and straight forward) tends to be far more complicated. Let alone being far from that predictable.

[eco-boat]

Thank you for your comments guys.

 

My boat is zero VAT rated. HMRC have a formula that gives you a gross weight figure. It doesn't make sense to me but who am I to question HMRC. The result of the calculation needs to be greater than 15 tons for HMRC to class the vessel as a ship.

The boat builder is the one who is responsible to HMRC for VAT charges. The disaster stories on the internet are about those contracts where the boat builder put in a clause that made the buyer responsible if HMRC questions it. These stories have made the buyers more careful and made the boat builders more responsible - I don't believe any boat builders are attempting to put that clause in these days.

My boat builder (as is the case with many) fully understand the rules defined by HMRC. My boat builder has been to court twice to fight HMRC (I wouldn't fancy my chance in that kind of battle) and on both occasions they won. So they understand the details of the law and of HMRC's attitude to it.

 

VAT is supposed to be for luxury items (remember the debate about Jaffa cakes being biscuits or cakes). This means that live-aboards should be exempt from VAT (all of them). HMRC are bending/breaking the rules when they apply VAT to live-aboards but their argument is that smaller vessels are easier to convert into pleasure vessels (thus qualifying for VAT). It's a weak argument but they are difficult to fight.

HMRC have recently introduced a change to their rules on zero rated live-aboards and that is the 9' beam or less does not achieve VAT exemption. My boat builder intended to challenge this and go for a third court case victory but the barrister costs were so high that the boat builder just had to let it go.

 

My original question was answered by myself. I found a clause on the HMRC website that said zero rated equipment, materials and services could qualify for zero VAT but only if they were a part of the same contract as the boat build. So unfortunately for me, all my additional purchase for my sailaway fit-out needs to be purchased through my boat builder.

 

Following up on someone else's comment....... You can reclaim VAT when you're not VAT registered. If you live on land and want to buy some renewable energy components for your house, they are 5% VAT rated. You buy your solar PV, heat pump or whatever at 20% VAT then you contact HMRC and show them your receipts. They reimburse you with 15%. One of my customers is doing this as we speak.

 

Personal Update

 

My blog is now quite old (5 years I believe) and much of my intentions and many of my views have changed as I have learned more about the boating world. I will resume writing on the blog very soon because my fit-out will start in the next few weeks.

I have been planning to buy a boat from Colecraft for 6 years. Last week, after having a build slot booked for 12 months and them having a significant deposit for 6 months and days away from steel cutting, they told me that they didn't want to build a boat for me, they don't have the time, and I should take my deposit back. I understand why they did this - they are traditionalists and I am a long way from that, so to them I am a 'difficult customer'. It did shatter my dreams though.

Next day I picked up the pieces and bought myself a new, already built, sailaway by Collingwood. I had to make a few compromises and I'll be doing alterations for months to come but it will get me on the water sooner.

 

     Mark

[Graham Davis]

Lots of very nice words Mark, but until you actually have it in writing from the VAT Inspectors I think you are jumping to (very) large conclusions.

 

And VAT is not just a tax on "luxury items"!

[Sea Dog]

11 hours ago, eco-boat said:

VAT is supposed to be for luxury items (remember the debate about Jaffa cakes being biscuits or cakes). 

 

Ah yes, luxury items... like fire extinguishers!  Would that it was so simple.

[Robbo]

9 hours ago, Graham Davis said:

And VAT is not just a tax on "luxury items"!

You mean sanitary towels are not a luxury item?