Brexit: What are the exceptional circumstances to avoid paying boat VAT again?

Are you confused about the boat VAT rules in the UK and EU following Brexit? Yachting Monthly experts help to unravel what the new regulations post-Brexit mean for sailors

Boat VAT is liable on boats that have been cruised outside of the UK and EU for over three years

Boats owners who cruise outside of the UK or the EU for over three years face paying a second VAT payment on return

What are the exceptional circumstances to avoid paying boat VAT again?

It is clear that if a boat is exported from the UK or EU for more than 3 years then that boat will be subject to VAT upon its return, even if it is returned by the same owner to the same country as it left – except under exceptional circumstances.

What are those exceptional circumstances?

It seems that if you do a circumnavigation of greater than 3 years you are in for VAT upon return unless one can fit somehow into the exceptional circumstances!

Jeff Wrinch

The chair of the Cruising Association’s Regulations & Technical Service group, Robin Baron responds:

Jeff’s question is a good one.

To date HMRC has steadfastly refused to give guidance as to when they will regard ‘exceptional circumstances’ as applicable.

Informally they have indicated that the effect of COVID-19 restrictions may constitute exceptional circumstances.

In the EU the equivalent expression is ‘special circumstances’ and again there is currently no guidance.

Continues below…

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Circumnavigators do indeed run the risk of having to pay VAT again but this is not a new rule and there has always been this risk for circumnavigators.

Robin Baron, chair of the CA's RATS group

Robin Baron is chair of the Cruising Association’s Regulations and Technical Services group. Credit: Robin Baron

What is new is that the rule now applies on taking a boat out of the UK rather than the EU.

Keeping a boat in an EU country for more than 3 years now also triggers the risk.

If they are in the fortunate position of being able to have a new boat built in the UK or the EU for the circumnavigation they can export it immediately and thus defer payment of VAT until their return.

They will then pay VAT on the second hand value of the boat.

This is no help to owners of second hand VAT paid boats.

The CA is continuing to engage with HMRC and others to highlight the bizarre and unfair aspects of the UK VAT rules as applied to leisure vessels.

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