At 23:00 hours UTC on 31 December 2020 the Brexit transition period ended and at that point the UK ceased to be a European Union (EU) member state and became a “third country”.
Officially, the UK has held third country status since it left the EU on February 1, 2020. However, during the transition period, the UK remained in the EU Customs Union and in the Single Market with free movement of people, capital, goods and services – the four freedoms. As a third country we no longer have the right to these EU freedoms. As far as the EU is concerned, we are now just another country that makes up the rest of the world and we can expect to be treated as such.
The EU-UK Trade and Cooperation Agreement, which was reached on 24 December 2020, forms the basis for the future relationship between the UK and the EU. However, in terms of the issues that the RYA has been working on since the referendum, this agreement has made little if any difference.
The RYA estimates that up to 33,000 British people who go boating in Europe may be affected by the new UK Customs and VAT legislation which penalises ordinary people who, as UK nationals and residents, have followed the rules and utilised the freedoms that were available to them as a result of the UK’s membership of the EU.
The RYA believes that it is important that the customs and VAT relief arrangements applied since the transition period ended are fair and reasonable. The RYA considers that the new arrangements do not currently meet these requirements.
The protocol on Ireland/Northern Ireland came into force at the end of the transition period. It is a mechanism that is intended to avoid a hard border on the island of Ireland, protect the all-island economy and the Good Friday (Belfast) Agreement, and safeguard the integrity of the Single Market. This means that Northern Ireland will continue to apply the Union Customs Code and will remain aligned to a limited set of EU Single Market rules needed to avoid a hard border.
Northern Ireland remains part of the customs territory of the UK. However, EU customs duties will apply to goods entering Northern Ireland if those goods are at risk of entering the EU Single Market (i.e the Republic of Ireland). No customs duties are payable if goods entering Northern Ireland from the rest of the UK are not at risk of entering the EU Single Market.
In order to avoid a hard border on the island of Ireland, and to protect the integrity of the Single Market, EU VAT rules for goods will continue to apply in Northern Ireland. However, the UK (i.e. HMRC) is responsible for applying VAT legislation, including the collection of VAT, and the setting of VAT rates. In addition, VAT exemptions and reduced rates applied in Ireland may also be applied in Northern Ireland.
In spite of this, clarification is still required on recreational boat movements under the Protocol. HMRC is aware of the RYA’s concerns and has undertaken to provide this information as soon as possible.
The RYA will continue to seek clarity until the situation for boats which were lying in Northern Ireland at the end of the transition period is fully understood and clarification on the procedures for boat movements, with Northern Ireland as the departure point or the destination, has been received.
- VAT and import duty (currently 0%) can become payable purely by virtue of the vessel being in the “wrong” geographical location at 23:00 UTC on 31 December 2020.
- HMRC gave insufficient notice that to qualify for Returned Goods Relief (RGR), boats needed to have been in the UK in the past and that boat owners would need to evidence this.
Within the four freedoms and as a EU member state, recreational boat owners had a right to buy and keep their boats wherever in the EU they wished, as long as the VAT was paid. They did not have a choice about where the VAT and, if applicable, import duty was paid, as this was determined by the national legislation bringing the EU VAT Directive and Union Customs Code (UCC) into force in EU member states.
In April 2019 HMRC advised the RYA that, “In the event of the UK, leaving the EU without a deal, HMRC will allow RGR for any pleasure craft, which has union paid status and belongs in the UK because of registration or the nationality/place of establishment of the owner. We believe that temporary admission should allow any without those qualifications to land in the UK.”
This indicated to the RYA that boats would either be eligible for Returned Goods Relief (RGR) or for Temporary Admission as the return within 3 years condition of RGR had, in practice, generally been waived by HMRC for recreational craft. The statement was therefore taken at face value and was understood to mean that a boat which belongs to the UK would be able to return to the UK without paying VAT and import duty irrespective of whether it had been (or when it was last) in the UK.
Recreational craft coming to the UK, that were in free circulation and were lying in the EU when the Brexit transition period ended at 23:00 UTC on 31 December 2020 have already paid VAT (and duty) according to the legislation that was in force prior to the end of the Brexit transition period. On 14 September the RYA was told by HMRC that the UK legislation (now in force) would ignore this and requires that a boat which was lying in the EU27 at the end of the transition period has to have been in the UK under its current ownership. Furthermore, the owner has to demonstrate that to be the case, if it is to be allowed to enter the UK with relief from import VAT and duty as returned goods.
The short notice with which this advice was provided coupled with the ongoing travel restrictions posed by COVID-19 and weather conditions limited the ability of recreational boat owners to return to the UK. We believe that the timing of this guidance was insufficient in normal times. It was entirely impractical and unreasonable during the pandemic.
We will continue to lobby MPs on the unacceptable stance the government has taken, by making Returned Goods Relief unavailable to anyone whose boat hasn’t been in the UK during their ownership, but who has complied with the law while the UK was a member of the EU.
The RYA believes that a solution for such owners, which is both workable and reasonable, is to allow anyone who is resident in the UK to bring their boat to the UK if it was in free circulation in the EU at 23:00 UTC on 31 December 2020 irrespective of any of the conditions of RGR by a specified date, which should be set once the restrictions on travel imposed as a result of the coronavirus pandemic have been lifted. When setting a date, the Schengen Area immigration restrictions now in force should be taken into consideration.
Inadequacy of Returned Goods Relief
- Returned Goods Relief (RGR) may be appropriate for the movement of commercial goods but for recreational boat owners the conditions are too rigid and double taxation can result.
- It is important that the new customs and VAT relief arrangements are fair and reasonable. The legislation in force does not currently meet this standard.
In April 2019, HMRC advised the RYA that, “In the event of the UK, leaving the EU without a deal, HMRC will allow RGR for any pleasure craft, which has union paid status and belongs in the UK because of registration or the nationality/place of establishment of the owner. We believe that temporary admission should allow any without those qualifications to land in the UK.”
This indicated to the RYA that boats would either be eligible for Returned Goods Relief (RGR) or for Temporary Admission as the return within 3 years condition of RGR had, in practice, generally been waived by HMRC for recreational craft.
The first indication that this would not be the case in the future came from HMRC on 14 September 2020 when it was announced that the RGR conditions would be strictly enforced.
As a result of the RYA’s lobbying a one-year transitional arrangement was legislated. This has since been extended by six months and provides those owners who have been in the UK with their boat previously, but not within the three years prior to the date of import, the opportunity to return to the UK by 30 June 2022, provided the boat was lying in the EU27 at the end of the transition period and the other RGR eligibility conditions are met.
The ongoing travel restrictions may limit the ability of recreational boat owners to return to the UK. The extension to the transitional arrangement is clearly a step in the right direction.
The RYA is concerned that HMRC has provided no explanation as to when or the reasons why the previous policy of routinely waiving the three-year condition under RGR was changed. Despite this they have stated that the return within three years condition will in the future be strictly enforced, HMRC claims its operational policy on this has not changed.
HMRC has the ability to waive the requirement for a boat to return within three years condition but has stated that this will only be done if HMRC considers it reasonable to do so in view of any exceptional circumstances which the owners of goods can present and is only done on a case by case basis.
The RYA will continue to seek clarification from HMRC and will lobby MPs with a view to achieving fair and reasonable conditions and timescales that private recreational boats must meet in order to return to the UK without VAT and import duty becoming chargeable.
a. Print, sign and post your letter to the MP’s House of Commons address (House of Commons, London, SW1A 0AA); or
b. Attach your letter to an email and then send to the MP’s Westminster office (Email addresses for MPs can be found on their profile on Parliament.uk).
If you are an RYA Member and you have any questions about contacting your MP or the RYA’s ongoing work on Brexit, please contact email@example.com.
Government 'Brexit: new rules are here' guidance
Government guidance can be found on GOV.UK.
This includes a tool which enables you to check what the new rules mean for you. By answering a series of questions about your circumstances you are directed to the information relevant to you.
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