Yachting VAT Note, May 2011

Since HMRC’s Revenue & Customs Brief 20/11: Accounting for acquisition VAT on intra-EU supplies - changes to the ‘fallback’ provisions came out on Tuesday 20th May, we have been flooded with questions as to what it means.

The effect of this on the acquisition of yachts is detailed in the Brief as follows (for Isle of Man read UK):

In 1997 Customs & Excise agreed to arrangements under which a UK VAT registered business could account for acquisition VAT in the UK on a yacht purchased from a supplier in another Member State without the yacht arriving in the UK. This was announced in Business Brief 12/97 ... which also permitted input tax deduction subject to the normal rules.

Following the CJEU decision the UK acquirer may now no longer recover the UK acquisition VAT as input tax. For this reason the agreement will cease to have effect and so is to be withdrawn from 1 June 2011. After that date UK acquisition VAT accounted for on a yacht that does not arrive in the UK will no longer be recoverable as input tax.

However, as a transitional measure, any UK VAT registered business who, before 1 June 2011, entered into a contract for the purchase of a yacht and who intended to adopt the procedure as agreed in Business Brief 12/97, may continue to rely on those arrangements (including recovery of the acquisition VAT as input tax, subject to the normal rules) when the yacht is eventually delivered. But this is subject their holding satisfactory evidence of the contract and the date that it was agreed.

Moore Stephens Yachting has consulted on these provisions. In the first instance we were interested in the transitional provisions since any contracts in progress may be significantly affected by the changes and there may still be time to allow the
The clock is ticking... parties to conclude in the context of law at the time of negotiation.

There is only a short time frame before the 1st June 2011 to take advantage of the existing VAT rules since these come to an end after the 31st May 2011. It is still possible for yachts to be treated under the existing arrangement providing certain steps are taken. We urge you to contact us immediately to discuss these transitional provisions where you have cases of yachting transactions in process.

Fears that this measure will spell the end of the yacht industry in the Isle of Man and that yachts would move elsewhere are unfounded. As has been proven time and time again, reputable, well-regulated, international financial centres thrive on challenges and as a firm, we are confident that the Isle of Man continues to be a good example of this in providing proactive solutions in accordance with support and guidance of the authorities.

We will explore the implications of this significant development in more detail in our next Yachting VAT Note, out soon.

For more information, please visit www.moorestephensyachts.com

2G Marine News Button

Twitter Icon

Yachting Pages

2G Marine News Button

Submit a business reviewView current promotions