Complex customs rules meant that British owners would need to return their EU-based boats to UK waters before New Year’s Day- or face a double VAT bill.
Following national outcry after the government did a U-turn on its promise not to enforce a double tax bill until the end of the Brexit transition period, British-owned boats have been given leeway on a second tax bill until next year.
In October, it was announced that British-owned boats, including superyachts, moored in EU waters for at least three years would have to return to British waters before New Year’s Day 2021 to avoid paying VAT twice.
Following heavy criticism, this date has now been pushed back to December 31 2021.
Key context
The plans to levy VAT on the import of boats into the UK comes as a result of the UK government applying a long-established EU VAT law into UK law.
EU tax law gives "Union-goods" status to yachts which have VAT paid in an EU country. This status allows yachts to move freely across the EU without having to pay additional VAT or Customs duties.
However, the "Union-goods" status is lost if a yacht is exported outside of the EU for more than three years under the Returned Goods Relief rules.
EU tax law gives "Union-goods" status to yachts on which VAT had been paid in an EU country.
When “Union-goods" status is lost, then VAT must be paid on the value of the boat when it is re-imported into EU waters.
Last year, the government stated that all British-owned boats would continue to hold full VAT-paid status until the end of the Brexit transition.
Latest updates
In mid-October HMRC back-pedalled on its decision. They have stated that they will continue to apply Returned Goods relief until the end of 2021.
The government stated: “We fully recognise that some individuals will have possessions in the EU that were exported more than three years ago. That’s why we’ve made the returned goods relief available for these possessions for a year from 1 January 2021, subject to the other conditions for relief being met.”
Recreational boats in the UK can now move freely between EU and UK waters without having to pay customs duties as long as the VAT has already been paid on the boat in the EU.
The Royal Yachting Association’s director of external affairs Howard Pridding has stated that the decision is welcome, but not “long enough”. He cited Covid-19 travel restrictions and rough winter weather as reasons that would make it difficult to yacht owners to bring their boats back in time.
There is also a lack of clarification on a number of points, including:
- Whether HMRC’s position covers boats that been outside of the UK for many years.
- Whether the rules apply to yachts which have never been located in the UK, therefore implying that no export has taken place.
- How HMRC will handle yacht Owners who might be unable to return their boats to the UK in time as a result of the type of yacht (eg. sailing or explorer), the location of the yacht (eg. more distant destinations including Greece) and Covid-19 travel restrictions which continue to impact free movement.
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