UK VAT on Yachts – Changes to Returned Goods Relief have become UK Law

The Cruising Association announced in mid-December that the UK Government would make a positive change to the application of Returned Goods Relief for recreational craft resulting in many boat owners no longer becoming liable to pay VAT on the return of their boats to the UK.

HM Revenue and Customs have followed through with these proposed changes and the proposed changes have now become law. The relevant statutory instrument (Customs Reliefs from a Liability to Import Duty and Miscellaneous Amendments) (EU Exit) Regulations 2020) was laid in the House of Commons Library on 16 December 2021, with an effective date of 28 December 2021 and was subject to the “negative procedure”. This means that it becomes law unless either House annuls them within a fixed 40-day period (when the House is sitting). The 40 day period expired on 23 February 2022 without any objection from either House and so the statutory instrument has come into force.

The changes have considerable benefits for the UK based cruising community:

  • Where a boat currently abroad is eligible to obtain relief from VAT through RGR, there will be no requirement to return the boat to the UK by 30 June 2022 in order to obtain this. As long as an owner can demonstrate that the boat has been located in the UK at some point in their ownership, RGR for boats will not be time limited, and
  • Owners of UK-based boats which are VAT paid will be able to go on extended cruises without the worry that VAT may become payable when they return the boat to the UK at the end of the cruise.

With the proposed changes now UK law, the cruising community will be able to enjoy cruising outside the UK for extended periods with the assurance they will not incur additional UK VAT charges, if the following conditions are met:

  • the person importing the boat into the UK is the person who originally exported it,
  • the boat will be used in the UK for non-commercial purposes, and
  • the boat is substantially unmodified during its absence.

For absences from the UK of more than three years an application needs to be made to HMRC for a waiver, but HMRC have indicated that waivers will be routine provided that the conditions are satisfied. There is no need to show exceptional circumstances to justify why the return did not occur within three years.

Unfortunately, the situation for owners who bought their boats VAT paid in EU and have never brought them to the UK has not yet been resolved. VAT will still be payable on the value of these boats when they are imported into the UK. The Cruising Association is continuing to engage with HMT and HMRC to work on a solution to this problem. The Cruising Association President, Derek Lumb, has recently written to the Financial Secretary to HM Treasury, Lucy Frazer QC, asking her to address this issue.

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