Many of the members we have spoken to, since the UK triggered Article 50 and started to take steps towards leaving the European Union, have been surprised to learn that the payment of VAT on a vessel is not necessarily a one off event. In fact every time you leave the EU customs territory with your boat, technically speaking, you risk having to pay VAT on its return.
This is because, the EU VAT Directive states that a chargeable event for VAT occurs when goods (in our case the boat) are imported.
However, triggering a chargeable event for VAT doesn’t always lead to a VAT payment. If goods (the boat) are being reimported in the same state [condition] as they were exported by the same person who exported them, and provided the goods are exempt from customs duties then Article 143(e) of the VAT Directive provides for an exemption from VAT.
Whether or not the goods are exempt from customs duties is determined by Article 203 of the Union Customs Code (UCC). Article 203 permits goods that have Union status when they are exported from the customs territory of the European Union to be granted relief from import duty provided they return to that territory within three years.
In summary, in order to be entitled to relief from VAT and, if applicable, import duty on arrival in the customs territory of the European Union (commonly called returned goods relief – or RGR) a recreational craft must:
- have had Union status when it was taken out of the EU; and
- have been exported from the EU by the same person as is importing it; and
- be in the same condition as when it was exported; and
- return within 3 years of export.
The result is that boat owners usually move seemingly seamlessly in and out of the EU, irrespective of the boat’s flag state, the nationality of the owner, or the Member State in which the VAT (and, if applicable, import duty) were accounted for.
It has always been the RYA’s view that a boat owner’s entitlement to RGR would not be altered by Brexit alone. However, as many RYA Members have boats which are outside the EU customs territory, we have been working to obtain confirmation from the European Commission in order to provide peace of mind for these members.
This confirmation has been received by the RYA in the last few days, and the European Commission has confirmed that, if the UK leaves the EU without ratifying a withdrawal agreement (i.e. without a deal), pleasure boats located outside the UK and the EU27 (the remaining 27 EU countries) at the moment that the UK leaves the EU can, on return to the EU customs territory, benefit from relief from import duty as long as they fulfil the requirements established in UCC Article 203 and Article 158 of the UCC-Delegated Act (this specifies what is considered to be “returned in the condition in which [the goods] were exported”). If this is the case they should also be exempted from VAT according to Article 143(1)(e) of the VAT Directive.
However, owners should note that Article 203(6) UCC states, “The relief from import duty shall be supported by information establishing that the conditions for the relief are fulfilled”. We therefore encourage all members to retain evidence to show that the criteria detailed above are met. Additionally it is recommended that evidence of the location of the boat at the time of a ‘no deal’ Brexit, is obtained and retained, to evidence eligibility for RGR in the future.
For more information about the RYA’s Brexit work, visit www.rya.org.uk/go/brexit.