HMRC has caused controversy amongst the many thousands of British yacht and motorboat owners who keep their boats in EU countries.
Last year, HMRC was very clear that all British owned yachts would continue to hold full VAT-paid status at the end of the Brexit Transition Period, irrespective of the location of the yachts. However, in early October, HMRC changed its approach and said that it will reproduce the Returned Goods Relief rules into UK law and would apply these rules rigidly.
This would mean that the exemption from a further payment of VAT could only be claimed for boats returning to the UK within three years of the date on which they left the UK.
It meant that many boat owners had already lost UK VAT-paid status as they had either kept their boats outside the UK for more than three years or they had bought their boat outside the UK and had never located it in UK waters. This would result in a considerable reduction in value to many of these yachts.
If British boat owners are required by HMRC to pay a further tranche of VAT, in order to bring their boats back home into UK waters, they are far less likely to bring them back.
This will result in less business for British marinas and less work and money spent in the UK yacht repair and maintenance industries that work alongside them. Many British yacht and motorboat owners are also likely to sell their yachts overseas.
In mid-October, though, it was confirmed that the government has decided to extend RGR for a period of a further one year to goods that left the UK/EU more than three years before the end of the transitional period and are currently in the EU, provided the other conditions of RGR are fulfilled.
The announcement from the Treasury follows repeated calls from organisations, including the RYA and British Marine, to HMRC for a review of the transitional arrangements for post-Brexit customs and VAT issues.
Responding to the announcement, the RYA’s director of external affairs, Howard Pridding, said: “We are pleased that the Treasury has listened to our concerns. However, a one year extension remains wholly short of the three year transitional arrangement that is needed and fulfilling the other conditions of RGR is causing further uncertainty.
“Recreational boating is a seasonal market and moving boats is affected by weather conditions and other safety related issues. The Covid-19 situation additionally complicates this and boat owners are going to need a realistic transitional period to establish a date of export to qualify for RGR.
“We will continue our dialogue with HMRC pressing them to understand that eligible recreational craft should secure relief from VAT and import duty on arrival in the Customs territory of the UK if it meets the criteria for RGR and has returned to the UK by 23:00 UTC on 31 December 2023.
We also need replies to questions of detail that we have been repeatedly asking government before we can feel confident in the advice that we are providing to RYA members.”
The Cruising Association is also pressing for more clarity and has raised a number of issues with HMRC. The Association agrees that one year is unlikely to be adequate for many boat owners to return their boats to the UK, especially with the ongoing pandemic. They would also like more information about boats that were bought by their UK-based owners in an EU 27 country but have never been located in the UK and, similarly, whether the updated HMRC position covers boats that have been outside the UK for many years.