Second VAT payments for EU-VAT paid boats returning to the UK

UK residents who bought EU VAT paid boats and based them in the EU will still have to pay VAT again if they want to return their boats to the UK

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UK sailors, who bought and kept their yachts in the EU before Brexit, will have to pay VAT for a second time if they decide to bring their yachts back to the UK.

Her Majesty’s Revenue and Customs (HMRC) had previously stated in April 2019 that UK owned boats would retain their UK VAT paid status, whatever their location on the day the UK left the EU, with owners able to claim Returned Goods Relief. 

This position was reaffirmed by HMRC in November 2020, but by mid-December 2020, HMRC reversed their position, leaving owners just days to return their boats to the UK before the end of the Brexit transition period on 31 December 2020.

Since then, the UK marine industry, including the Association of Yacht Brokers and Agents (ABYA), Royal Yachting Association (RYA), British Marine, and The Cruising Association (CA), has lobbied the Government to reverse their decision and allow recreational boat owners, established in the UK, who lawfully purchased and kept their boat in the EU at the time the UK was an EU member, to be eligible for Returned Goods Relief.

UK residents, who bought and kept EU-VAT paid boats in the EU, will have to pay VAT again if the boat enters UK waters. Credit: Graham Snook/Yachting Monthly

UK residents, who bought and kept EU-VAT paid boats in the EU, will have to pay UK VAT if the boat enters UK waters. Credit: Graham Snook/Yachting Monthly

But HMRC has now confirmed that no changes will be made to the VAT rules for boats located in the EU on 31 December 2020, and have never been in the UK under their current ownership. If such boats enter UK waters while owned by a UK resident then UK VAT will be payable.

The RYA director of external affairs, Mel Hide said the decision was ‘a deeply disappointing outcome and falls well short of resolving the issue for those who have been caught out by incorrect advice provided by the Government. It would also seem to fall short of the Government commitment to assist UK industry as we forge our future outside of the EU. We must now consider what action we can collectively take to seek a better outcome.’

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The president of the CA, Derek Lumb, condemned the decision by the UK Government.

‘The CA is bewildered as to why people who bought boats in Europe and paid VAT on those boats should now be discriminated against in this way. This intransigence by HMRC is deeply disappointing and a further obstacle for the cruising community,’ he said.

As a result of the COVID-19 pandemic and rise in boat ownership, there is a shortage of second hand boats for sale in the UK.

The chairman of ABYA, Peter Norris said HMRC’s decision will ‘have a significant financial impact on UK boat owning residents, as well as the UK marine industry, which is already suffering from increased costs and a shortage of product within the UK market place.’

‘The decision [..] seems not to be aligned with Government policy as stated by the Prime Minister and his Chancellor, to try and grow the economy. Had these vessels been allowed to return, they would have invested money in the UK marine industry on services and berthing, which ultimately would have generated additional VAT income as well as additional corporation tax,’ said Norris.

New and used boat sales grew by 9% in the UK in 2020

The shortage of second hand boats in the UK will only be increased by HMRC’s decision, says the Association of Yacht Brokers and Agents. Credit: Theo Stocker

He said HMRC had not provided any information on how it had decided on this policy, and it would be lobbying to find out.

Yachting Monthly asked HMRC why it had decided to not implement the request to change the rules around Returned Goods Relief.

A spokesperson said: ‘The Government has introduced a number of policy changes to address concerns made by the sector about the Returned Goods Relief rules in relation to pleasure craft coming to the UK. While the Government keeps all tax policy under review, there are no current plans to proceed with further policy changes at this time.’

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