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The VAT man cometh.


Gary Peacock

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Good to his word the VAT man is now handing out the same treatment we received to other builders up and down the country who dared to build what they deemed to be qualifying vessels.

We are no longer alone in this fight (Up to now it felt like it sometimes) and although having to pay VAT on previously qualifying ships will hit the customer in the pocket, the end result for the builders especially the smaller sole traders will be devastating when an accessment of duty owing on all previous builds is made.

 

If your builder receives a visit ask them to get in touch, represented together we may have a bit more weight to preserve the VAT status of your build and possibly in the long run preserve the future of the builder.

 

Gary Peacock

 

LBBC

:rolleyes:

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It would seem people are finally waking up to the VAT mans intensions.

 

This is the latest news on the DBA website-

 

UK authorities seek to increase VAT on barges. 2004 October 16

 

HM Customs & Excise, the UK Valued Added Tax authority, is seeking to alter its interpretation on the regulations concerning which vessels are liable to VAT at 0% for acquisition, conversion, and repair.

 

The rules say that a vessel is a "Qualifying Ship" and thus eligible for zero-rating providing it is over 15 tons and is not designed nor converted for recreation of leisure.

 

A VAT tribunal decision in the 1990s confirmed that residence is neither recreation nor leisure. However, HMCE is trying to insist that a vessel cannot be a Qualifying Ship unless it has a cargo hold.

 

The British Marine Federation, responding to requests from several boat builders, is taking legal advice on HMCE's initiative. The DBA is working with BMF.

 

(DBA)

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The fact is that VAT zero rating for "qualifying ships" was introduced to encourage the building of cargo vessels and not the building of powered "residential" vessels. There was (and is) separate provision for unpowered houseboats that match the provisions for houses on land. A powered residential vessel cannot be compared to a house - how many houses can you move at will?

 

The legislation left loopholes that some broad beam boats and a very small number of narrowboats managed to creep through. The Government does not like tax avoidance of any description and we should not be surprised when it and its agencies attempt to have the legislation interpreted as intended. If, at the end of the day the legislation is changed to bring into line with the Government's intentions, we should be equally unsurprised.

 

I think Customs & Excise will be hard pushed to recover VAT on zero rated supplies made in accordance with the existing interpretation of the legislation. If boat builders have taken the precaution of obtaining advance clearance from C&E they will have a very strong case in law for not paying back dated imposts. Even those who relied on published information and opinions without getting explicit clearance would have a very good moral case. It is future supplies that are at risk and the way to tackle that - if you believe that zero rating should apply - is by lobbying your MP to ensure the current interpretation is maintained.

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I dont know what the fuss is about . i am in contact with the vat office most weeks to make sure that the stuff i am buying is vat free or not and so far i have had no problems with them, I have it in wrighting it is a qualifing boat and so far the only thing i could not have vat free is the timber for fitting out ( this is clasified as bulk meterials) according to there booklet.

They even sent me a new booklet 3/4 weeks ago and it was the same one i have had for the last 3 years with no ammendments at all.

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You are one of the "lucky" ones Richard - you have it in writing that your boat is a "qualifying vessel" and C&E will be hard pushed to go back on that ruling. The point is that future buyers may not be so "lucky". They may change their view (it seems as though they have done that already) and attempt to have all nerrowboats (and perhaps broad beams a well) classed as non-qualifying. They could do that by taking another case to a tribunal and running a different argument or by getting the law changed. As I said before, if you think that some boats should be zero rated, lobbyng your MP is what is needed.

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Hi all, my first post on here.

 

I've been reading the messages about the zero rating of new builds and would just like to add my two peneth.

 

My barge (for livaboard) is nearing completion and I have recently learned that it no longer qualifies as a zero rated vessel and that VAT "may" have to be paid (I believe it is going to tribunal but I'm not sure).

 

My builder is well aware that I could not pay this (very large) VAT bill and has agreed to stand it himself if worst comes to worst, (phew!).

 

However, I have learnt that other builders are now getting retrospective VAT bills for boats previously built to qualify for zero rating and that although the customer will be able to escape these bills the builders will not.

 

If you agree to buy a boat from a builder who is willing to zero rate it and then mid build he receives a massive VAT bill will you ever get your boat? Not all builders will be as understanding as mine, I suspect they could have made me sell my boat to recover the VAT, I'm not sure but thankfully it hasnt come to that (they would have made me homeless, thank god they have a conscience).

 

Dean.

Edited by Driffman
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If you have a contract with a boat builder for the supply of a boat at a price said to be inclusive of VAT, you could, probably, sue for completion of the contract - that is the supply of the boat at the agreed price - or for damages. Of course, that right is of little comfort if your boat builder goes bust because he has a huge VAT bill that he cannot pass on.

 

If the boat builder has any sense, he will have obtained clearance from C&E to the effect that the supply of your boat is zero rated. As I have said before, C&E would be hard pushed to go back on that clearance. They have the right to take a different view of the law and announce that new view, but I am sure the Courts would not agree it has retrospective effect and applies to boats already built and supplied.

 

There is a particular difficulty with boats that does not apply to most other supplies of goods and services - the long lead time and the fact that they are, generally, supplied under a specific contract. If the builder has the clearance of C&E, I don't think this difficulty should present a problem but it is as well to be aware of it.

 

I see from the Dutch Barge Association's website that the British Marine Federation has taken legal advice and is pursuing the issue with C&E. That is the best thing they can do but if you want to take some action - lobby your MP.

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Yes maybe the combined influence of the DBA and BMF might help clarify the VAT issue.

 

The count of companies now being pursued, that I am aware of is up to five.

And I understand certain companies who made zero rated supply of goods are also being looked at.

 

A customer of one of these companies when told he would have to pay VAT on their order sought advice from their local VAT office and received the following-

 

"VAT is a self -assessed tax, therefore it is the responsibility of the supplier to determine the correct liability of a supply and not that of HM Customs & Excise"

 

Based on previous builds and the content of the current version of 744c boats did qualify for zero rating.

 

I get the feeling the advice been offered really amounts to no advice at all!

 

 

Gary :(

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  • 2 weeks later...
I still say that two or three vat oficers sat in a office someware can not change the rules

 

VAT equals Customs and Excise, more powers of entry than the police, prone to nick people's car when returning from the continent and deciders of what is and what isn't for personal consumption when bringing in booze and fags (although I understand they and the Government are being taken to court, shame :) )

 

Richard

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I don't think this is a case of 2 or 3 VAT officials deciding to change the rules. The fact is that VAT zero rating for "qualifying ships" was introduced to encourage the building of cargo vessels and not the building of powered "residential" vessels. There was (and is) separate provision for unpowered houseboats that match the provisions for houses on land. A powered residential vessel cannot be compared to a house - how many houses can you move at will? Some powered "residential" vessels happened, on one interpretation of the rules, to be treated as "qualifying ships". Whilst it was fortuitous for a small number of owners it also went against the intention of the legislation. We should not be surprised if governments and their officials seek to uphold the intention (and, in their view, spirit) of the law.

 

There might be a case for arguing that the law should be changed to ensure that all boats built purely to be used as homes should be zero rated for VAT, although how that could be achieved to prevent the inevitable attempts at tax avoidance is beyond me. What is wrong with the view everybody seems keen on defending is that it applies zero rating to a very small number of boats and excludes many that are built purely for residential purposes simply because they are too small. Where's the fairness in that?

 

As I have said before, I think C&E will be hard pushed to apply a new interpretation retrospectively - especially where they gave specific clearance for paticular boats. The gung-ho approach exhibited by some Customs officials is coming in for a caning in the UK and European Courts. That will inevitably affect the way they approach other issues such as this one.

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The Excise people ARE a law unto themselves - just ask any computer contractor about IR35/IR591/S660 et al.

 

They can make the most ridiculous decisions with little or no consultation and we all get lumped with it. Even if you do try to follow the rules, they can turn round later and say your now fall outside the new changes so cough up the cash (back dated!) or we'll come and take it.

 

Grrrr. :)

 

I'll go and sit down now for a while to try and calm down. :)

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Let's be clear about this. Nobody in Customs & Excise is changing the rules. They are saying the rules have been interpreted in a particular way and that the interpretation is wrong.

 

A tribunal decided that a boat built for "residential purposes" was not built for "recreation or pleasure". As a result most wide beam boats and a small number of narrowboats could be "qualifying ships" and zero rated for VAT purposes. Customs & Excise are now saying that this defeats the purpose of the legislation which it clearly does. Zero rating for "qualifing ships" was introduced to encourage the building, purchase and operation of commercial vessels - not powered homes. They are entitled to take that line and to test their view through the VAT Tribunals and Courts if necessary.

 

For most of us this means very little indeed. Our boats will never be "qualifying ships" and we cannot take advantage of zero rating. For example, a 70' narrowboat built slightly deeper than usual can just qualify. A 65' narrowboat will never qualify. If boats cost, say, £1,000 per foot exclusive of VAT a 70' boat built to meet the qualifying conditions will cost you £70,000. A 65' boat built to the same spec (apart from length) will cost you £65,000 plus £11,375 VAT. Every boat between 59' and 69' will cost more than a 70' boat. How is that fair?

 

In the interests of having a tax system that includes equity and fairness as between one taxpayer and another, we should do one of two things. Either we say OK Customs have got it right or we campaign for zero rating on all boats.

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Hi Paul

It's not fair all live aboard boats should be vat free.

If you buy a house it is vat free EVEN if you now go out and buy a 2nd house say a cottage in the lakes or Wales it is also vat free even though it is for recreation and probably profit by letting.

And where you get the figure of £1000 per ft from i do not know Hawkins are just starting a 57ft tug for someone now and the price for that is £120,000 and that is not to the speck that mine will be.

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£1,000 per foot was just an example - not an offered price. It doesn't matter what figure you use. That 57' boat is costing about £102,000 plus £18,000 VAT. A 70' boat to a similar spec would cost around £125,000 with no VAT if it is a "qualifying ship" - just £5,000 for another 13'!

 

The problem with saying that all live-aboards should be VAT free is who decides when a boat is purely for residential use and no other. What about the people (and there will be some) who swear blind that they are gong to live aboard and then sell the boat as soon as it is delivered. The potential for tax avoidance is enormous. It would be simpler to argue that all boats should be zero rated but the problem with that is that boats are still seen as luxuries and giving exemption would be viewed as politically unacceptable.

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Hi Paul

You make a point, but that 2nd home in wales is no diferent and that has not come under scrutany and i bet there far far more people with 2nd homes than boats,

It could be done on the princaple that a person can only have one dweling wether it be house, boat ,caravan or cave.

Though that in it's self would be problomatic in monitering as imany including myself will be in the position of having both for a year whilst fitting out.

As well as the tribunal rulings that have been passed so far there is one that says that a qualifing ship does not have to be for dweling just capable of being so.

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Hello all,

 

I am trying to keep clear about the ethics of should or should not boats be deemed "qualifying vessel" although it seems to me a loop hole C&E intend to plug.

Until such time my concerns relate to the unfair trading advantage given to builders who are given the green light to carry on zero rating while others are pursued by C&E for exactly the same practice.

 

The argument whether VAT relief should be made available to residential/house boats with engines is a different one.

Should the law me modified to allow the same amount of relief currently available to owners of house boats without means of propulsion, static caravans and newly built houses?

 

We had one case of a customer with a residential ex working boat who whished to have a new boat built to replace it. He did not want an engine because he had never moved the old boat in all the time he had it. But he claimed the opperators of his moorings would not grant him a mooring for a new house boat, only for a vessel with its own means of propulsion.

This chap didn’t even know he could have had an houseboat zero rated but was more upset about having to have an engine he wouldn’t use.

 

I don’t know if this type of ruling applies to many moorings but if it does I think we have a bit of an issue!

 

 

Does any body want to swap a boatyard for a caravan park?

 

 

Cheers

 

Gary

:)

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  • 2 weeks later...

thank god I decided to opt out of the zero rating option for my live-aboard wide beam, after finding that production run builders who charge VAT can be just as cheap as made-to-measure builders who offer zero-rating but have much higher overheads per unit and are probably less reliable and efficient.

 

New Boat and Liverpool Boat told me they wouldn't even discuss the issue, having already been caught on a boat that nominally measured >15tonnes.

 

Richard: The second home is not exempt from capital gains tax when you sell (at an enormous profit), but your main residence is exempt.

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Hi All I still say that two or three vat oficers sat in a office someware can not change the rules it will take an act of parliment, and that could take years.

 

Richard, An act of parliament is followed by a Statutory Instrument (SI).

 

Once the SI is made it is then up to the authorities to interpret that SI.

 

If that interpretation is deemed at a later date to be eroneous they can change the interpretation.

 

No change to the SI is required.

 

Yes two or three vat officers could theoretically make some devastating changes and it wouldn't take years.

 

Ergo we are up the canal without a boat.

 

Yes it could be tested in a Court of Law but methinks that the new interpretation would stand until the Court says otherwise.

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Hi,

 

Customs will eventually clarify their stance publicly in the form of a business brief.

 

This will then become the policy that they adopt, both in the future and retrospectively.

 

If you can prove advice given by customs previously was incorrect or contradictory, you have a few options left open to you including the customs misdirection policy.

 

I managed to win zero rating for two boats based on misdirection mainly because of errors in correspondence from customs officers.

 

The system of appeal short of going to a full tribunal is very much in the favour of customs.

 

I have spent nearly a year trying to get this sorted out one way or another. The best that can be hoped for at the moment is that zero rating of residential boats under the Qualifying Ships section of the VAT act will be stopped. And customs will cease pursuing builders to recover the duty on boats built in the last three years.

 

Later maybe we can then try to fight for boats with a means of propulsion being given the same status awarded to one without and static caravans.

 

Before people start saying they can't do that and you should write to your MP etc.

Customs have done this and MP's etc are involved, at the end of the day customs have closed a fairly obvious loop hole. The treatment been dished out to builders and their customers is another issue.

 

Cheers

 

Gary

 

(I think I should buy a boat and take up a relaxing hobby!)

:o

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