VAT

[Gary Peacock]

Since Waterways World seem to have managed to print a completely incorrect interpretation of a way to avoid paying VAT on a boat plus it seems or doesn't seem depending on who his giving the lesson that if you have a tug or butty combination built the tug can be supplied VAT free.

 

 

Then do you think that VAT should be payable on residential boats?

 

The subject is complex but to highlight it in simple terms you don't pay VAT on a house, caravan or house boat if it is for residential use the scope to provide VAT relief for boats built for residential use at present under law does not exist but should it?

 

After all when I was involved in a similar "discussion" before a rather high ranking civil servant told me that "only a handful of people live or would consider living on boats" and when I went on to mentioned VAT relief on residential caravans he then went on at length about not upsetting the Gypsy/Traveller community that would "make waves" if they had to pay VAT on new caravans.

 

Anyway it doesn't make any difference to the boat builders if you pay VAT or don't but is seems the powers that be look down on and don't even acknowledge that anybody lives on the water.

Edited January 19, 2008 by Gary Peacock

[Paul H]

Since Waterways World seem to have managed to print a completely incorrect interpretation of a way to avoid paying VAT on a boat plus it seems or doesn't seem depending on who his giving the lesson that if you have a tug or butty combination built the tug can be supplied VAT free.

 

 

Then do you think that VAT should be payable on residential boats?

 

Waterways World took a different angle this month with the widebeam boat Belladonna which they said as it has a large saloon with no fixed furmiture except a stove it could theoretically be used for cargo and was therefore VAT free. It was over 15 gross tons and therefore classed as a qualifying ship.

 

Seems an interesting loophole.

 

Paul H

[greywolf]

Presumably a butty with no engin is vat free or is this disinformation?but it vat payments should be the same for all residences be it Buck palace or a tent.

[Gary Peacock]

Since Waterways World seem to have managed to print a completely incorrect interpretation of a way to avoid paying VAT on a boat plus it seems or doesn't seem depending on who his giving the lesson that if you have a tug or butty combination built the tug can be supplied VAT free.

Then do you think that VAT should be payable on residential boats?

 

Waterways World took a different angle this month with the widebeam boat Belladonna which they said as it has a large saloon with no fixed furmiture except a stove it could theoretically be used for cargo and was therefore VAT free. It was over 15 gross tons and therefore classed as a qualifying ship.

 

Seems an interesting loophole.

 

Paul H

 

Treading carefully and taking into account current legal proceedings if the boat is to be qualifying ship it needs to meet the following criteria-

 

2.3 What is a "qualifying ship"?

A "qualifying ship" is legally defined as any ship:

 

of a gross tonnage of not less than 15 tons; and

which is neither designed nor adapted for use for recreation or pleasure.

 

2.4 How do I determine whether my vessel has been designed for use for recreation or pleasure?

You need to consider the nature of the vessel's design. To be a qualifying ship it must be designed for commercial purposes. If your ship does not have any features that indicate a commercial design (such as a cargo hold, commercial fishing equipment or the ability to convey large numbers of passengers) then it is not a qualifying ship.

 

HMR&C interpretation is that a boat used for residential purposes does not meet the "which is neither designed nor adapted for use for recreation or pleasure." criteria.

 

In two recent appeals at VAT tribunals on whether or not a residential boat was a qualifying ship one was successful the other was not HMR&C immediately appealed to the high court to have the winning case dismissed.

 

You can find the details of these two cases HERE

 

This is HMR&C official guidance on the subject-

 

EXTRACT FROM HM CUSTOMS BUSINESS BRIEF 31 DECEMBER 2004

 

4. VAT - CLARIFICATION OF THE VAT LIABILITY OF SHIPS SUPPLIED TO CUSTOMERS WHO INTEND TO USE THEM AS RESIDENTIAL ACCOMMODATION

 

This Business Brief article clarifies Customs’ policy on the application of the zero rates for ships and houseboats. Those involved in the supply, repair and maintenance of ships, and their customers, should read this Business Brief article.

 

Background

 

“Qualifying ships” - are zero-rated for VAT purposes. A “qualifying ship” is defined as a ship which is over 15 gross tons and is neither designed nor adapted for use for recreation or pleasure. Such ships usually have clear features of a commercial design, such as a hold specifically designed for carrying cargo, commercial fishing equipment or the ability to carry or entertain large numbers of paying passengers. Recreational activities could include pleasure sailing or cruising on inland waterways. A ship that is either designed or adapted with the ability to be used for private recreation or pleasure cannot be a "qualifying ship" regardless of how the purchaser intends to use it.

 

“Houseboats” - are covered by a separate zero rate. For VAT purposes, “houseboats” are boats designed solely as living accommodation that do not have, and cannot be fitted with, a means of propulsion. If a boat can be fitted with a means of propulsion, it is not a “houseboat”.

 

Customs’ policy

 

Following a Tribunal case, D G Everett (LON/92/1911A), Customs accepted that the terms “recreation” and “pleasure” do not include use as a home or place of permanent habitation. However, we are aware that some have incorrectly taken this to mean that all boats used or intended to be used for residential purposes can be zero-rated.

 

Customs maintains that use or intended use does not affect qualifying status. It is the nature of the original design and any subsequent alterations that is the key to determining the VAT liability of a ship or boat. For example, a true Dutch barge with a hold specifically designed for carrying cargo would be a qualifying ship, whilst a replica Dutch barge without such a hold and that is suitable for private cruising would not. Both could be used as residential accommodation, but this does not affect qualifying status. Only ships with qualifying status at the time of manufacture can be zero-rated, regardless of whether they are now used, or are intended to be used, as places of habitation.

 

Written advice from Customs

 

Customs are aware that, when determining the VAT liability of their supplies, some ship manufacturers have relied on advice given by Customs to their customers. In some circumstances this advice has been obtained on the basis of incomplete or inaccurate information. For example, on the strength of their intended use as residential accommodation, rather than the actual design, the customer confirms to Customs that the ship is neither designed nor adapted for use for recreation or pleasure.

 

It is the responsibility of the supplier to ensure that VAT is accounted for correctly on their supplies and that, when obtaining advice or written rulings from Customs, all relevant information is supplied and is materially correct. Suppliers should not rely on their customers to determine the liability of their supplies.

 

Past Rulings

 

Customs will follow its usual policy when considering supplies that have been incorrectly zero-rated. We will look critically at both our ruling and the information that was provided to us in the request. If we have misled a registered person to their detriment with the full facts before us, we will take action in line with our current misdirection policy, outlined in Notice 700/6 VAT Rulings. However, we will not be bound by rulings if the information provided was incorrect or incomplete or if the supply changed in technical detail from the one originally proposed.

 

Further Information

 

Please contact Customs’ National Advice Service on 0845 010 9000 for advice and assistance.

However the argument about qualifying ships is more about the rights and wrongs of boat builders/customers exsploiting what most people would consider to be a loophole in the VAT law.

 

My question relates to the rights or wrongs of should you pay VAT to have a have residential boat live on and why in law that should be so considered so different to a caravan?

Edited January 19, 2008 by Gary Peacock

[Gary Peacock]

Presumably a butty with no engin is vat free or is this disinformation?but it vat payments should be the same for all residences be it Buck palace or a tent.

 

Let's just say the interpretation being given by some builders does not quite match the interpretation offered by some elements of HMR&C!

 

If I was contemplating such a build I would like to see/have in writing specific clarrification of the VAT status from HMR&C.

 

Think of it this way if you buy a plastic cruiser without a outboard then there is no means of propulsion, so does that make it a house boat?

 

It gets complicated guessing how the interpritation will work.

 

This is the HMR&C guidance-

 

7.1 What is a houseboat?

A houseboat is defined for the purposes of VAT as being a floating decked structure:

 

which is designed or adapted for use solely as a place of permanent habitation; and

which does not have the means of, and which is not capable of being readily adapted for, self-propulsion.

 

7.2 What is meant by self-propulsion?

This term refers to any vessel that is either:

 

independently propelled; or

not independently propelled but could readily be adapted to be capable of self-propulsion, for example by installing an engine, propeller or mast.

It is unlikely that a vessel such as a barge or a yacht would be regarded as a houseboat for the purposes of VAT because they are likely to lend themselves to being readily adapted.

[greywolf]

i surpose at least you do not have to pay stamp duty on a live aboard barge or narrowboat.

[zenataomm]

In my experience Her Maj's Cust & Excise are not to be trifled with. They are not interested in standing around and chewing the cud. These are the people who have stronger powers than the police they don't need to wait for a ruling from the courts they can enter your property at any time without a warrant and can take what they want.

I wouldn't recommend anyone convincing themselves that their own interpretation about the laws of vat are worth a fig.

 

This is a governmental department that buys its company cars from auction, because they are used to them being rammed and damaged by upset "customers"

 

As interesting as it is to debate any subject, especially when it concerns interpretation of law be careful. I urge anyone to take the worse case scenario for themselves as a default outcome when trying to prove you got it right and it was HMC&E who made a mistake. Even in the unlikely event that after many costly appeals you are proven to have a case, chances are they will have already ceased your property, not looked after it too well and you'll be lucky to get an apology.

 

If the written description of a VAT ruling sounds vague, I can assure that is for their advantage and not yours.

As for the issue of a boat not having fixed furniture nor an engine being Vat excempt, then I'll just pop out to unscrew the table in my cabin cruiser, remove the outboard then I'll see you in the VAT free queue at the chandlers' eh?

[Gary Peacock]

Well the magazines strike again.

 

I you have spotted the quote in Canal Boat " Dutch Barges And Residential boats of similar size do not attract VAT: this is the latest decision from HMR&C" don't get over excited because I don't think HMR&C have every made that statement.

 

It might however be worth anyone who has got a boat built over the last few years trying to recover the VAT you paid before HMR&C have chance to clarify their position.

 

You might note the previous claims about the VAT status of the tug and butty combination also seems to have attracted the attention of HMR&C.

[WJM]

"In my experience Her Maj's Cust & Excise are not to be trifled with. They are not interested in standing around and chewing the cud."

 

Ha Ha - that is an understatement! - they are vicious nasty......

[Maffi]

What the Law is and what the law should be are obviously two different things.

 

I object to being part of a relatively small band of home owners that have to pay VAT for that which everyone else gets VAT free. In my case the VAT on Milly M was over £12,000, a tidy sum.

 

I do not own a ship I own a floating home. It is not for pleasure or recreation per se, but if it is argued that it is then all houses are the same. We all get pleasure from our homes and spend quite a lot of recreation time there.

 

Were I to sell it in future as a holiday home then maybe it should attract VAT but given it is my only home the government needs to re think this ruling and tell the C&E that we dont live on ships.

 

Of course dumb asses like Terry Darlington taking a narrow boat across the channel doesnt help.

 

i surpose at least you do not have to pay stamp duty on a live aboard barge or narrowboat.

 

No you dont but I would rather do that than pay VAT.

 

I dont think Milly M would qualify for stamp duty.

Edited July 11, 2008 by Maffi

[Ex- Member]

There could also be another arguement. If you purchase a sailaway widebeam and don't pay vat on it, then you have purchased a boat that has what could be considered has a cargo hold, that being the cabin space. Now we did this, and paid no vat. We then proceeded to fit the boat out, but for all or most of the materials we paid vat on, so we bought technically what is classed as a ship, then converted it to a livaboard boat I can't see the problem bet HMRC will though

 

Also I have found out is that the boat builder is ultimately responsible for deciding weather what he builds or supplies is liable for V.A,T This would turn out ok for us if the vat man wanted to pursue us. At the end of the day we were quoted for construction of a steel shell, the boat builder would need to satisfy his or her self that they are or are not charging vat where applicable. We didn't ask for any exemption from vat, we were told that vessals exceeding 15 ton gross weight were exempt, we were quoted and ordered the boat on that basis. So any boat builders still using this oblique loophole might have to ask more questions of the purchaser.

[Gary Peacock]

By the way it may also be possible to get your VAT back on a residential narrowboat if you have time to digest this VAT Tribunal ruling-

 

20489

 

 

VAT – zero rate – boats not designed for pleasure or recreation – whether they exceed 15 tons – correct method of calculation of tonnage – appeal allowed.

 

 

 

 

 

MANCHESTER TRIBUNAL CENTRE

 

 

 

 

RICHARD JOHN FEE

T/A SWIFTCRAFT BOATS

Appellant

 

- and –

 

 

THE COMMISSIONERS OF

HER MAJESTY'S REVENUE AND CUSTOMS

Respondents

 

 

 

 

 

Tribunal: Richard Barlow (Chairman)

Carol Roberts

 

 

 

 

Sitting in public in Manchester on 8 June 2007 and 17 September 2007

 

The Appellant in person.

 

Jonathan Cannan of counsel for the Respondents

 

 

 

© CROWN COPYRIGHT 2007

 

 

DECISION

 

1. This appeal is against an assessment of Value Added Tax in the sum of £68,480 issued on 19 January 2005 in respect of periods from 1 October 2001 to 30 September 2003. The respondents conceded that the first period assessed was out of time and that reduced the amount in dispute by £4,475. The assessment concerns the tax chargeable on 11 boats manufactured and supplied by the appellant. The out of time assessment relates to one such boat and the respondents further conceded that in respect of two more of the boats they would not maintain the assessment (in view of their tonnage exceeding 15). We were told the amount remaining in dispute is £50,496 and we were not asked to confirm the amount remaining in dispute and, in view of the fact that we hold that the appeal should be allowed in full, it will presumably not be necessary to do so but, in case it is necessary for any reason, we give liberty to the parties to apply to the Tribunal for the amount to be calculated.

 

2. The boats in question are all narrow boats of 60 feet in length which are suitable for use on most of the canals in the United Kingdom (boats need to be no more than 57 feet long to be suitable for all canals but nothing turns on this). The issue in the appeal is whether the boats exceed the tonnage for zero rating or whether they do not, in which case the supplies were standard rated.

 

3. The relevant legal provision, which provides zero rating for supplies to which it applies, is as follows:

 

VAT Act 1994 Schedule 8 Group 8

 

Item 1 "The supply, repair or maintenance of a qualifying ship …

 

NOTE A1 "In this Group-

 

(a) a "qualifying ship" is any ship of a gross tonnage of not less than 15 tons which is neither designed nor adapted for use for recreation or pleasure …"

 

4. The boats in question all have engines for self propulsion and so cannot fall within the zero rating provisions of Group 9.

 

5. Item 1 of Group 8 does not preclude a residential boat with an engine from being zero rated but it does not guarantee that it will be. There can be cases where the design makes a boat suitable for recreational or pleasure use so that it is precluded from zero rating even if it is used as a residence.

 

6. Mr Fee explained that the boats in question are not designed for recreation or pleasure as they omit some features that would normally be incorporated in pleasure boats such as open areas for socialising and extra sleeping accommodation for large parties of holidaymakers. Also at least some of the boats in question do have features such as workshops or office space as well as residential areas for use by the purchasers (some of whom do what might be, somewhat incorrectly, described as peripatetic work on the canals).

 

7. The respondents took no point on whether the boats failed the test of being designed for recreation or pleasure, partly because of a possible misdirection in correspondence, but they contend that the point might be open to them in other similar cases.

 

8. The tonnage of a ship is not a measure of its weight or the weight of cargo it can carry. It is a measure of the space inside the ship (or some of that space) multiplied by a numerical factor which then produces a figure that is expressed as so many tons (as in the VAT Act) or tonnes (in other contexts including, we were told, the law relating to registration of ships). There is no suggestion that the boats in this case were required to be registered.

 

9. The VAT Act 1994 contains no provision about how the gross tonnage might be measured but at the time the relevant supplies were made Public Notice 744C stated:

 

"Where the gross tonnage of a ship has not been ascertained under the Merchant Shipping Acts it is to be determined for the purposes of VAT only by the following formula:

 

L (m) x B (m) x D (m) x 0.235".

 

It should be noted that there is no basis for a contention that the Notice has the force of law.

 

10. L means length, B means breadth and D means depth and the (m) references mean meters.

 

11. The Notice then defines length, breadth and depth and it is the depth that is in dispute in this case. If the method of measurement proposed by Mr Fee is correct the boats exceed 15 tons of gross tonnage and if the respondents' method of measurement is correct they do not.

 

12. It might be thought that that ought to make this a simple matter to decide and indeed it would be were it not for the fact, as we have already noted, that the VAT Act does not make it clear how the measurement is to be made.

 

13. It might be argued that where there is a clear definition of something in legislation it should be taken that it applies to other legislation where the same concept is referred to even if there is no actual cross-reference to it in that other legislation. The argument would certainly be stronger if the two pieces of legislation are in pari materia (in an analogous case) to each other.

 

14. Regulation 14 of the Merchant Shipping (Tonnage) Regulations 1997 (S.I. 1997/1510) made under the Merchant Shipping Act 1995 provides for a calculation similar to the one in Public Notice 744C quoted above except that the factor by which the measurements are multiplied is 0.16 and it only applies to vessels of less than 24 meters in length. It clearly is not in pari materia with the VAT Act 1994.

 

15. At a date later than the making of the supplies in question in this case the Public Notice was changed so that the multiplication factor of 0.235 was reduced to 0.16 which was therefore more in conformity with the 1997 Regulation but that change was described in the Public Notice as having been agreed with a trade organisation rather than being established by law.

 

16. Mr Cannan pointed out that the higher factor is to Mr Fee's benefit as it gives a higher rather than a lower gross tonnage when the same boat is measured. He described the earlier method of calculation as a concession but we do not regard it as an extra-statutory concession in any technical sense.

 

17. The literal application of the Merchant Shipping Regulations calculation cannot resolve the question as to why the gross tonnage of a boat might be measured in all cases in the way the Public Notice describes because some boats that might require to be measured might exceed 24 meters in length and there is a completely different method of measurement for such boats in the regulations. Although a boat of that length may not be suitable for use on canals in this country it should be recognised that the zero rating provision in question is not in any way limited to canal boats.

 

18. We are therefore being asked to apply strictly, in some respects, a method of measurement laid down in the Merchant Shipping legislation but to adapt it in another respect simply because the Commissioners had adopted that adaptation in a Public Notice applicable at the relevant time. Even now that the Public Notice conforms more closely with the Merchant Shipping legislation it does not follow it precisely.

 

19. The situation is not satisfactory but we are conscious of the fact that in enacting the VAT legislation the legislature must have intended that some boats would qualify for zero rating rather than that none would and, given that a supply is standard rated unless it falls within one of the zero rating or exempting provisions, it would not be compatible with the perceived will of the legislature to conclude that as no means of measurement is provided no boats can qualify.

 

20. We therefore conclude that as a matter of law the reference to a gross tonnage exceeding 15 tons must mean a gross tonnage calculated in accordance with the Merchant Shipping Regulations so far as is possible but that at the relevant time the multiplying factor was 0.235.

 

21. The facts are not in dispute but in order to understand the conclusion we have reached it is necessary to begin by describing the boats.

 

22. They are flat bottomed, or nearly so, and straight sided, or nearly so, and therefore they are basically box shaped, ignoring for the moment what might be termed the lid of the box. The sides of the boats are just under 2.050 meters high measured from above the floor timbers to below the ceiling. However there is a "step" in the sides of the boats about 1.28 meters above the baseline which reduces the width of the boat above that point by 100 millimetres on each side. We do not use the term step to define the feature we are describing. We use it only the better to describe it. 100 millimetres is about four inches. The steps are not flat. The outer edges are curved and the curves account for about 30 millimetres of their width so that the flat part of the steps is only about 70 millimetres in width. That is to say that the flat surface is less than the width of an adult's foot and, although the steps extend along most of the length of the boats, they do not afford a safe or even a practicable means of moving from one end of a boat to the other.

 

23. The reason this step is important is that the respondents contend that the step forms part of the upper deck of the boats and limits the measurement of the depth in the tonnage calculation. This is because of Regulation 14(3)( B )(i)(aa) of the Merchant Shipping regulations which reads:

 

"(3) For the purposes of this Part –

 

…

( B ) the depth of a ship shall be measure vertically at the mid point of the length overall.

 

(i) The upper terminal point shall be –

 

(aa) in the case of a decked ship, the underside of the deck on the middle line or if there is no deck on the middle line at the point of measurement, the underside of the deck at the side of the ship plus the full deck camber".

 

24. At this point it will be useful to describe the top of the boats. For much of the length of the boat the top of the boat is a uniform height and it is slightly cambered so that the mid point is slightly higher than the outer edges. Near the stern of the boat there is a raised area with a window in the front to form a wheelhouse. The tops of the boats are of course 200 millimetres less in width than the extreme width because of the steps on either side. The tops of the boats are designed to be strong enough to walk on and serve as a means of progress from one end to the other for anyone not wishing to walk through the cabins. The inside edge of the top of the boats is the ceiling of the living areas.

 

25. The respondents argue that a deck is "a platform extending from side to side of a ship covering the space below, and also itself serving as a floor" (as defined in the Oxford English Dictionary). According to the respondents the steps, which the appellant described, no doubt in more correct nautical terms as side sections, are part of the deck.

 

26. They rely on one of the definitions in regulation 2 of the Merchant Shipping regulations which defines the "moulded depth" (which is not relevant here) and, in the case of a ship less than 24 meters in length, "the depth" as being the underside of the upper deck at side. "Upper deck" is defined as the uppermost complete deck exposed to weather and sea and in the case of a ship having a stepped upper deck "the lowest line of the exposed deck and the continuation of that parallel to the upper part of the deck is taken as the upper deck" (our emphasis in both places)

 

27. Their argument is that there is a single deck exposed to weather and sea and that its shape is as follows. It begins where the step diverges from the vertical line of the lower part of the boat and then continues vertically to the top of the boat where it crosses the boat with a slight camber and then down again on the other side to the outer edge of the step on the opposite side.

 

28. The respondents then argue that, as the steps provide the "lowest line" of the upper deck "at side", the line of that exposed part of the deck is notionally taken across the inside of the boat horizontally to the camber of the top part of the deck and/or that as it is a stepped upper deck the steps determine where the lowest line by which the measurement is to be made falls. The effect of that, if correct, would be that the space inside the boat consisting of the whole of the inside of the boat above the level of the steps is ignored for the purpose of measuring the tonnage and as it happens that makes the difference between exceeding 15 tons of tonnage and not exceeding it.

 

29. The crucial issue therefore becomes whether the "steps" can be said to be part of the deck because there is only one deck and if they are part of it they establish where the measurement should be taken because they are its lowest line.

 

30. We heard evidence from Mr Oliver Vardy who is a naval architect and marine surveyor and an assistant policy manager with the Maritime and Coastguard Agency which deals with the calculation of tonnage for the purposes of registration of ships. His job entails looking after what he termed the day to day policy relating to the tonnage measurement policy. He was called as an expert witness by the respondents.

 

31. He told us that he regarded the deck of the boats in question as being a stepped deck and that what we have called the steps were the lowest line of the deck.

 

32. When he was asked for the definition of a deck he said that the term had a multitude of meanings but that in the context of measuring tonnage it was taken to mean a weather tight deck.

 

33. When he was asked why he said that the steps were part of the deck he said that was because there is only one deck because that is the only one that goes right from side to side. He accepted that he could not say how narrow a step would be before it could be ignored though it was clear that he accepted that there must be a limit below which a step would be ignored and would not form part of a deck. When he was asked about whether a step 30 millimetres wide would be ignored he said he did not know. He agreed that he thought a deck had to be horizontal.

 

34. Mr Vardy is not professionally involved in measuring the tonnage of boats like those in the present appeal and has no experience of doing so.

 

35. None of the provisions for the measurement of tonnage, including the definitions, actually defines what a deck is. They define types of decks and produce consequences for certain varieties of decks.

 

36. We find the dictionary definition helpful and emphasise the phrase "serving as a floor" which accords with our understanding of the normal meaning of the word deck in the English language. As we have already explained, we reject the conclusion that the steps serve as a floor, they are too narrow for that.

 

37. It is also relevant to have regard to the fact that the step in the side of the boats serves a purpose and that that purpose is not that of a deck in any ordinary sense. The boats have portholes or windows which are above the level of the step and in a boat with entirely vertical sides those portholes or windows would be vulnerable to breakage when the boat came into contact with jetties or lock walls and the like. Some boats have a rubbing bar of some sort attached to the side to ensure that when they come in contact with such features the portholes or windows do not themselves strike the hard surfaces. In these boats the step serves that purpose and that is why Mr Fee designed them a he did.

 

38. Although the definitions refer to measurement "at side" we by no means agree that that means at the extreme edge of the ship in question and indeed the more natural meaning, in context, is at the side of the deck. In other words the deck should be identified first and then the measurement taken from there rather than the side of the ship necessarily being taken to define where the deck starts regardless of whether that is a part of the ship that can really be called part of a deck (which is the respondents' interpretation). However, even if we are wrong in that Mr Vardy accepted that there could be a step which was too narrow to affect the issue and that a deck must be horizontal. It is for us to decide how small a step can be ignored applying the de minimis principle (ignoring that which is too small to be considered relevant) and in our view the steps in this case with a usable horizontal surface too narrow to afford a safe footing are not part of the or any deck and the measurement should therefore be taken from the midpoint of the underside of the actual deck which is the top of the boat with the consequence that on the agreed facts that means that the boats in question exceed 15 tons of tonnage and do qualify for zero rating.

 

39. We should just add that although we heard a good deal about whether the wheelhouse should be treated as "a break" we do not find it necessary to make any finding about that as breaks are additional spaces above the normal line of measurement which can be added to the rest to determine the tonnage. As the tonnage exceeds 15 without these additions we do not need to consider whether they should properly be added in fact.

 

40. The appeal is allowed and if Mr Fee wishes to apply for an award of costs he is directed to do so within three months of the release of this decision. The assessment under appeal is discharged.

 

 

 

 

 

CHAIRMAN

 

RELEASED: 30 November 2007

 

 

 

 

MAN/06/0525

 

 

So if you wan't to try and get your VAT back it is possible!

[Gary Peacock]

I would like to say well done to Canal Boat for the little snippet they published on saying "HMR&C clarified the new VAT situation by saying that as long as a new-build meets the criteria of being 15 gross tons and not designed for recreation or pleasure, then it will not have to pay VAT."

 

I would now suggest all those people who are ringing me and other builders for a refund should give the editor of Canal Boat a bell and ask him to speak to his contact at HMR&C who made this statement to seek assistance in reclaiming the VAT they overpaid!

 

 

Either that or someone at HMR&C should pull their finger out and issue a updated business brief making this statement official!

Edited July 14, 2008 by Gary Peacock

[larkshall]

Gary, 'leisure and pleasure' does not equate to residential essentially.? eg i have to live somewherem why not a boat, but i may gain no pleasure, and naff all leisure from it (boats always need something doing).....just a tangental view...

[blackrose]

I would like to say well done to Canal Boat for the little snippet they published on saying "HMR&C clarified the new VAT situation by saying that as long as a new-build meets the criteria of being 15 gross tons and not designed for recreation or pleasure, then it will not have to pay VAT."

 

I would now suggest all those people who are ringing me and other builders for a refund should give the editor of Canal Boat a bell and ask him to speak to his contact at HMR&C who made this statement to seek assistance in reclaiming the VAT they overpaid!

 

 

Either that or someone at HMR&C should pull their finger out and issue a updated business brief making this statement official!

 

Why are they asking you for the refund Gary? You don't keep the VAT. Surely they should be applying directly to HMR&C?

[Gary Peacock]

Why are they asking you for the refund Gary? You don't keep the VAT. Surely they should be applying directly to HMR&C?

 

Well it gets complicated but because of the way VAT works if an incorrect VAT assessment was made where by the builder had incorrectly accessed the VAT status of what was actually a zero rated boat then in the first instance the VAT registered builder will have to go through the process of declaring a incorrect assessment and get the VAT back from HMR&C to then refund it to the customer.

 

The customer did not pay VAT directly to HMR&C so it is quite difficult for them to make any approach directly for a refund. (The recent case was different because the owner had paid the VAT directly.)

 

The problem is if a boatbuilder does refund VAT and it all goes pear shaped and the interpretation of zero rating is changed again then the boat builder could find themselves with a future demand for the VAT back again! (This actually happened before.)

 

I think you can see why Canal Boat are causing problems by leaking some inside knowledge that does not seem to have yet been made available by HMR&C to the industry or public.

 

If HMR&C have made such a statement then a lot of people are going to be entitled to a 17.5% refund on the cost of fully fitted boats and goods to complete DIY projects that have been purchased over the last few years.

 

I don't see this being so easy but if Canal Boat have got a good source and the statement is correct then anyone with a claim would be very silly to not at least try to get a VAT refund.

 

So maybe it would be a good idea for those who would be entitled to a refund to get their heads together and have a go? Maybe a few letters to Canal Boat requesting them to do a feature how to go about this might help too!

[adam1uk]

Why don't you just ring Nick the editor and ask him?

[Gary Peacock]

Why don't you just ring Nick the editor and ask him?

 

 

Because I have no desire to bang heads with HMR&C again this time we collected the VAT and paid the VAT so we have nothing at all to gain from getting involved.

 

Now if I potentially was owed back nearly £15K on a £100K boat then I would be very interested.

 

The problem is that it really falls to HMR&C to make an official business brief statement, that is the usual route for these type of announcements not a article in a magazine.

[Gary Peacock]

I know that sound a bit harsh but I spent 4 years and one hell of a nightmare of stress trying to sort it all out in the past, it personally cost me about £20K that now can never be recovered.

 

I have every sympathy with those trying to recover VAT they paid but I don't really have the stomach for fighting for them anymore and every time the various magazines print things like this it all starts again.

Edited July 15, 2008 by Gary Peacock

[larkshall]

Actually no VAT should be charged on a primary residence. Purchasers should sign a declaration that the boat is main residence and land registry search undertaken to ascertain they have no other home.

[Gary Peacock]

Actually no VAT should be charged on a primary residence. Purchasers should sign a declaration that the boat is main residence and land registry search undertaken to ascertain they have no other home.

 

Well that was what used to be done a declaration to that was signed to that effect, the problem was that no one could actually prove where the practise had originated from (Many claimed it to be previous guidance from HMC) so when builders presented them they were worthless.

[Timleech]

Actually no VAT should be charged on a primary residence. Purchasers should sign a declaration that the boat is main residence and land registry search undertaken to ascertain they have no other home.

 

 

That wouldn't work if they had a primary residence on land which was rented.

 

Tim

[Ex- Member]

That wouldn't work if they had a primary residence on land which was rented.

 

Tim

 

You wouldn't pay V.A.T on second home, so if you say your boat is your primary home, then just say your other house is a holiday home for leisure

[Maffi]

Actually no VAT should be charged on a primary residence. Purchasers should sign a declaration that the boat is main residence and land registry search undertaken to ascertain they have no other home.

 

A fine sentiment but (f)'actually' incorrect.

Edited July 16, 2008 by Maffi

[blackrose]

I doubt this throws up anything new, but after reading one of these VAT threads I decided to contact HM Revenue & Customs myself. Their response below may be of some interest:

 

Boat used for sole living accommodation

 

Thank you for your correspondence dated 15 July 2008 regarding the

above.

 

I apologise for the delay in replying and for any inconvenience this may

have caused.

 

From the information you have kindly provided, I understand that you are

seeking advice on how you can claim back the VAT paid on a barge of over

15 metric tonnes, built in 2005, which should have been zero rated as it

was intended to be used as a dwelling, and not for the purposes of

leisure or recreation.

 

You have referred to the VAT Tribunal ruling 20489.

 

I would like to clarify that it is the responsibility of the VAT

registered supplier to establish the correct liability of any given

supply. We do not normally supply a VAT ruling to a supplier's customer

unless they disagree with the supplier's original decision and the

relevant Public Notice does not cover the matter of concern.

 

Although I cannot provide you with a ruling I can give you the following

general advice.

 

If there is basis for a reclaim of VAT originally charged by a supplier,

the customer will generally receive the refund from the supplier. The

supplier will then make an adjustment to his records and receive a

repayment from HM Revenue & Customs for the VAT that was originally over

declared. Such adjustments are normally subject to a three year cap.

This is explained within the VAT Notice 700/45 - How to correct VAT

errors and make adjustments or claims.

 

I would also refer you to the VAT Notice 744C - Ships, aircraft and

associated services. Section 2 sets out the conditions in which a ship

or boat can be deemed as qualifying, which may enable the zero rate to

apply. Section 4 clarifies the VAT liability itself.

 

Of further interest, an update was issued on 9 July 2008 that clarified

that HM Revenue & Customs had considered that vessels intended for

residential living that have a means of propulsion (so are not

houseboats ), are vessels designed for recreation or pleasure and are

not eligible for zero-rating under Schedule 8, Group 8 of the VAT Act

1994. On 5 June the High Court handed down its judgment in the case of

Colin Stone and whether his Dutch barge which was intended to be used as

his domestic accommodation was a vessel designed for recreation/pleasure

or not. The High Court held that his vessel was not a vessel designed

for recreation/ pleasure and was thus a qualifying ship and was

zero-rated. HM Revenue & Customs are currently considering how best to

deal with this judgment and how to take the policy, or indeed, the law

forward.

 

HM Revenue & Customs acknowledge the area of residential vessels is a

complex one and are examining the policy and we will issue further

guidance in due course, which will be published on our website.

 

Our Public Notices are accessible online by following these steps;

www.hmrc.gov.uk >> Library (Quick links) >> Publications >> Notices,

Information Sheets and other reference materials >> VAT >> All VAT

Notices (numerical order)

 

If you have any further queries regarding this matter, please do not

hesitate to contact the address shown above quoting our reference

number.

 

 

Yours sincerely

 

R Baker

Written Enquiries Officer