Marine Mortgages - VAT
In
applying for your marine mortgages, you will almost
certainly be asked by your marine finance lender, to supply evidence of the
VAT status of your boat.
Valued added tax is a particularly complicated issue for for boats in European waters and is an area of legislation that continues to develop year by year. As a result there is a huge amount of misinformation within the boating industry, often with expensive ramifications.
I hope the following will help to clarify in simple terms the VAT issues when both buying and using a yacht in EU waters. Finally if you are buying a large yacht then it is possible to significantly reduce the VAT payable using an Italian or French lease to finance your boat. These are widely used throughout Europe, and now becoming increasingly popular in the UK as an alternative to marine mortgages.
Marine Mortgages - Vat Rules Private Boats
Whatever you may hear, read, or be told by so called "experts", friends, or others in the boating world, the following rules apply without exception:
- All private yachts owned or used by EU residents must be VAT paid if they are used in EU territorial waters
- Non EU residents may own and use a private yacht VAT free on a temporary import basis (TI) for up to 18 months.
- Pleasure yachts built before 1985, and in EU waters on 31st December 1992 are treated as VAT paid. You will need to have evidence that the yacht was in EU waters on this date.
So, when applying for your marine mortgage make sure you have clear documentation from the owner regarding the VAT status of your boat. If you own a private boat in EU waters without having paid the VAT, you are breaking the law. You have been warned.
Marine Mortgages - Vat Rules Charter Boats
The rules on charter boats are less clear - however, I can assure you that if you think you can reduce your VAT liability by simply pretending to be a charter business, then forget the idea now. HM Customs are well aware of such tax evasion and will clamp down hard. For legitimate charter businesses it is possible to set up tax structures to mitigate or defer the payment of VAT on both the purchase and running costs of the yacht. You will need to consult an expert tax advisor for specialist advice.
Marine Mortgage - Reduce VAT Using A Lease
Financing your yacht with a marine mortgage is fine, but it does not allow you to mitigate the VAT on a private boat. However, using an Italian or French leasing finance solution, it is possible to reduce the VAT to 6%. These are entirely legitimate schemes introduced by the Italian and French governments, and are extremely popular both on the continent and in the UK. If you would like further details of boat leasing finance, please just follow the link where you will find details and examples of how these schemes work in practice.
In simple terms the bank buys the boat, and rents it back to you, with reduced VAT applying to the rentals. At the end of the lease term you have the option to buy the yacht at a previously agreed residual value, or simply to return it to the bank. The yacht can be owned personally or within a company structure, and the yacht can be registered under the UK flag. Chartering is permitted under the terms of the lease.
Now let's look at another area of boat buying and owning that your marine mortgage provider will want to check - CE markings and the Recreational Craft Directive. Who said marine mortgages were easy!!
Marinablu International Ltd is an Introducer Appointed Representative of DeNovo Underwriting Agencies Ltd. DeNovo Underwriting Agencies Ltd is Authorised and Regulated by the Financial Services Authority (FSA)