How could Brexit affect the VAT Paid Status on recreational craft?

Featuring Simon Anslow | 19th March, 2019

HMRC has recently confirmed that future customs rules for goods moving between the UK and the EU, including for arrangements relating to pleasure craft, will depend on the outcome of negotiations with the EU.

What happens if the UK is unable to secure a customs partnership deal?

  • Third country customs controls would apply to all pleasure craft moving within UK waters. A variety of reliefs, such as Return Goods Relief, may however apply. When the UK leaves the EU, customs declarations may be required for pleasure craft which are being imported to the UK from other EU countries and export declarations would be required for pleasure craft sold to other EU countries.
  • Where goods are entering or leaving the UK temporarily, there would be a requirement for private owners and businesses to use either special customs procedures, such as Temporary Admission or the Carnet system. These procedures would require personal owners or traders to provide financial security to cover any potential liability for import duty. It would be for importers and exporters to decide which process would be most suitable.

What does this mean? In addition to the HMRC guidance, Simon Anslow, PKF Francis Clark VAT Partner and British Marine VAT specialist, provides the following analysis:

UK brokers bringing non-UK VPS vessels into the UK for sale would either have to arrange for UK import VAT and potentially duty where under 12m.

  • UK VAT registered businesses bringing vessels into the UK for business use (either for resale or for own-use operation) would have to pay VAT/duty on entry BUT HMRC have confirmed that (for the foreseeable future) postponed accounting for imports would apply. This means that businesses do not pay the VAT upfront but deal with it through their VAT return, declaring the VAT on the value, but also simultaneously reclaiming that same VAT either in full (or proportionally depending on their taxable use)
  • Ex-pat UK owners that can demonstrate previous UK VPS on returning to the UK can have import VAT relieved under Returned Goods Relief (RGR) subject to the following conditions:
    • Imported normally within three years of its export (although HMRC are very flexible on this – we have seen one allowed RGR after seven years)
  • Imported by the same person who exported it
  • The vessel has undergone no more than normal running repairs, maintenance, etc. (i.e. not works to increase the value).
  • Vessels brought to the UK from the EU to undergo work would be subject to Customs procedures. They would then be dealt with as current ex-EU vessels are, in that zero-rating would apply to the works provided the vessel exits the UK after the work is done but would be subject to Inward Processing Relief (IPR) procedures. Although following the changes two years ago, authorisation has become extremely onerous and lengthy, HMRC has indicated that post-Brexit and to assist businesses, it would expedite applications and reduce or even waive guarantees
  • Private vessels visiting the UK from the EU would have to observe the same rules as current ex-EU vessels – i.e. under TA. This is reasonably informal but there would be the requirement to contact the National Yacht line, file a C1331 and fly the Q flag.

For further advice on VPS, please contact Simon Anslow.

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