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Gary Peacock

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Ha! Dealing with the VAT people is harder than trying to catch an eel wearing vaseline coated boxing gloves. A law unto themselves!

 

I can imagine that trying to catch a live eel is quite difficult in itself, but if the eel is also wearing vaseline coated boxing gloves... now that's a challenge!

 

Seriously though, at least they replied, which is more than I imagine many boat builders would do. Since any VAT that is due to the customer comes from the supplier (in my case Liverpool Boats), I reckon that would be the difficult bit - why would they bother claiming VAT back from HMR&C if it is of no advantage to themselves - or is it?

Edited by blackrose
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"HM Revenue & Customs are currently considering how best to

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

forward."

 

I like that bit, it's a bit like saying "Yes we lost the law say we were wrong, but we don't accept it."

 

You won't get the VAT back off a boat builder very easily! A customer contacted HMC directly four years a go over claiming the VAT back on a narrowboat, HMC agreed he was entitled to it back so the builder did just that but later HMC said woops and demanded it back from the builder unfortunately the customer wouldn't give it back to the builder.

 

So we now have three ongoing issues-

 

Is a broad beam residential boat zero rated?

 

Is a residential narrowboat zero rated?

 

Is the butty element of a tug and butty zero rated?

 

The subject is very complex but I strongly believe that in the eyes of HMRC regardless of loop holes and interpretation under law non of them are zero rated. :lol:

Edited by Gary Peacock
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(Liverpool Boats giving you the VAT back) There is no advantage for them - they might get it back only to give it to you. There is nothing in it for them.

 

In my business I charge VAT on everything. It makes no difference to me, I take it in and then hand it on. I cant understand the rules on what is zero rated, and it would seem neither do the VAT people themselves. So to be safe I charge it on everything but my customers are all VAT registered so they all claim it back later on.

Edited by WJM
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"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."

Purely out of interest I wonder how it was issued and to who?

 

We haven't had an update.

 

 

And since we do the dirty work collecting tax for El Gordo and the boys plus having the responsibility of the VAT

registered supplier to establish the correct liability of any given supply it seems strange we did not get the update?

Edited by Gary Peacock
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  • 3 weeks later...

This is the latest guidance to boatbuilders from the BMF on the recent ruling relating to VAT on house boats.

 

Dear Member

 

 

NEWS FROM THE COURTS

 

 

We would like to inform you about a recent court ruling relating to VAT on house boats which may be of interest. This may be relevant to boats built by you in the recent past that have been used by the buyer as residential accommodation.

 

 

HMRC v Lt Cmdr Colin Stone (The Kei)

 

 

HMRC has lost its appeal in the High Court, against a Tribunal decision that a sea-going Vessel (a reproduction Dutch barge) qualified for zero-rating within the meaning of Schedule 8, Group 8, item 1 Value Added Tax Act 1994.

 

 

The appellant (Commander Stone) was applying to bring in a houseboat which was capable of self propulsion. However, he was intending to use it for a residential purpose. HMRC argued that VAT was payable but the High Court confirmed that it qualified for zero-rating.

 

 

What does this mean for BMF Members?

 

 

Any boat builder who has, in the last three years, built a boat which:

 

 

(i) is of a gross tonnage of not less than 15 tonnes;

 

(ii) has a motor attached to it to allow self propulsion; and

 

(iii) is being used as residential accommodation by the new owner;

 

 

has an opportunity to go back to HM Revenue & Customs to request repayment of the VAT that has been paid over on the transaction.

 

 

However, you should note that under VAT law, you are under an obligation to pay this VAT back to the final customer; otherwise HMRC will refuse repayment under the 'unjust enrichment' clause.

 

 

It may well be that you as the boat builder may be approached by some "final customers" to request repayment of the VAT that you charged them. This will be the case law they will be using as the basis for that request.

 

 

It should also be noted that this is only a High Court decision and HM Revenue & Customs has the opportunity to appeal this decision if they so wish which could lead to a further change in this position.

 

 

 

 

 

So what does it all mean?

 

 

Well without HMR&C take action to appeal the decision then if you have had a boat built meeting the criteria above and you can convince your builder to go back to HM Revenue & Customs to request repayment of the VAT that has been paid over on the transaction then you could be looking at getting quite a few beer tokens back! :lol:

 

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But will it clear the way for the tug and butty combo do you recon or is that another question?

 

No that remains a very "iffy" subject if not out right tax fiddle.

 

Here is the guidance from HMRC the bits in red are the points to consider-

 

 

7. The VAT treatment of houseboats

 

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.

 

 

 

 

The way it was explained to me was-

 

Suppose you buy a nice new expensive plastic cruiser, it does not come with the outboard motor because you have to choose and pay for that separately so that would mean that it hasn't got a means of propulsion so it could be an houseboat couldn't it? So you wouldn't have to pay VAT!

 

In the same way the tug element could be considered in exactly the same way the outboard motor is above?

 

So I think those that chose to make their own interpretation of the mythical OK from HMRC to build these things need to be very careful and keep some money in the bank just in case the VAT man comes knocking! :lol:

Edited by Gary Peacock
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So does this mean you are going to ask for my VAT back?

 

 

 

This is the latest guidance to boatbuilders from the BMF on the recent ruling relating to VAT on house boats.

 

Dear Member

 

 

NEWS FROM THE COURTS

 

 

We would like to inform you about a recent court ruling relating to VAT on house boats which may be of interest. This may be relevant to boats built by you in the recent past that have been used by the buyer as residential accommodation.

 

 

HMRC v Lt Cmdr Colin Stone (The Kei)

 

 

HMRC has lost its appeal in the High Court, against a Tribunal decision that a sea-going Vessel (a reproduction Dutch barge) qualified for zero-rating within the meaning of Schedule 8, Group 8, item 1 Value Added Tax Act 1994.

 

 

The appellant (Commander Stone) was applying to bring in a houseboat which was capable of self propulsion. However, he was intending to use it for a residential purpose. HMRC argued that VAT was payable but the High Court confirmed that it qualified for zero-rating.

 

 

What does this mean for BMF Members?

 

 

Any boat builder who has, in the last three years, built a boat which:

 

 

(i) is of a gross tonnage of not less than 15 tonnes;

 

(ii) has a motor attached to it to allow self propulsion; and

 

(iii) is being used as residential accommodation by the new owner;

 

 

has an opportunity to go back to HM Revenue & Customs to request repayment of the VAT that has been paid over on the transaction.

 

 

However, you should note that under VAT law, you are under an obligation to pay this VAT back to the final customer; otherwise HMRC will refuse repayment under the 'unjust enrichment' clause.

 

 

It may well be that you as the boat builder may be approached by some "final customers" to request repayment of the VAT that you charged them. This will be the case law they will be using as the basis for that request.

 

 

It should also be noted that this is only a High Court decision and HM Revenue & Customs has the opportunity to appeal this decision if they so wish which could lead to a further change in this position.

 

 

 

 

 

So what does it all mean?

 

 

Well without HMR&C take action to appeal the decision then if you have had a boat built meeting the criteria above and you can convince your builder to go back to HM Revenue & Customs to request repayment of the VAT that has been paid over on the transaction then you could be looking at getting quite a few beer tokens back! :lol:

 

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It would be nice but unfortunatelly those nice people at HMR&C put a stick in the works so it's no beer tokens for you. :lol:

 

The problem is that Milly M is what they term to be a narrowboat and the guidance says that A "qualifying ship" is legally defined as any ship:

 

  • of a gross tonnage of not less than 15 tons.

Now unfortunately just before your boat was built HMR&C revised the notice (not law) explaining how the calculation of gross tonnage should be made-

 

 

 

 

2.11 How do I calculate the gross tonnage of unregistered ships?

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

 

For vessels 24 metres or greater in length:

 

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

 

For vessels less than 24 metres in length:

 

L(m) x B(m) x D(m) x 0.16

 

 

Where:

 

 

L

 

 

=

 

 

Length measured from foreside of the foremost fixed permanent structure to the afterside of the aftermost permanent structure. This measurement must not include appendages that do not contribute to the volume of the vessel.

 

 

B

 

 

=

 

 

Beam – breadth of vessel at widest part to the outside of outer planking. This measurement must not include the thickness of any moulding or rubbing strake which may be fitted, in way of such measurement.

 

 

D

 

 

=

 

 

Depth measured vertically from the midpoint overall.

 

 

The upper calculation point will be:

 

 

  • for a decked vessel - the underside of the deck on the middle line, or (if there is no deck on the middle line) the underside of the deck at the side of the vessel.
  • for an open decked vessel – the top of the upper strake or gunwale.

The lower calculation point will be:

 

 

  • for a wooden vessel – the upper side of the plank at the side of the keel.
  • for a metal vessel – the top of the plating at the side of the keelson.
  • for a moulded vessel (for example one made of glass-reinforced plastic) – the inside of the hull. Where no keel member is fitted and the keel is of open trough construction, the calculation point shall be the top of the keel filling, if fitted, or the level at which the inside breadth of the trough is 10 centimetres – whichever gives the greater depth.

But they also added this little bit which cancels your free beer tokens-

 

 

 

 

2.12 What about calculating the gross tonnage of multi-hulls or narrowboats?

For multi-hull vessels, each hull must be measured separately for overall length, beam and depth and the vessel as a whole must be measured.

 

For narrowboats, the measurement must be taken from the underside of the deck at the side of the vessel, rather than from the roof of the cabin.

 

 

Now if Milly M was a broad beam or a barge style narrowboat it might have been free drinks all around!

 

Now if you really wanted you could argue with HMRC that a barge style narrowboat is still a narrowboat but you would need to read up the argument HERE (Word Document!)

 

It gets complex but basically HMRC do not like narrowboats and people claiming that it is their home.

 

 

 

 

So does this mean you are going to ask for my VAT back?
Edited by Gary Peacock
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Perhaps I should chip in with a few observations from my VAT battle.

 

HMRC confirmed that they will not be taking my case to the Court of Appeal.

 

HMRC “official guidance” – VAT Notices, Business Briefs etc are just guidance. They are not the law. As my counsel says “coffee table” publications.

 

As the recent written enquiry hinted, I suspect that HMRC will look to a change in the law to bring it in line with the EU Directive.

 

I too have been unable to find the HMRC 9 Jul 08 revised guidance.

 

A tug and butty combo should have the butty zero rated – it is not readily adaptable to be fitted with self propulsion. Butty = lighter = towed.

 

A plastic purchased without outboard engine would not be zero rated – it is readily adaptable for self propulsion.

 

Individuals have the difficulty in that it is a company that deals with the taxman, and it is not in their interest to waste time battling HMRC on behalf of their customer – just as Gary P has pointed out. Or they will bill you. Extra bill = VAT saved!! By sourcing my vessel in another EU country I dealt with HMRC directly.

 

This saga has taken me 2 ½ years and it is still not over as HMRC are not playing ball over costs. It has not been very stressful, but might have been if I thought I was not going to win!!

 

Widebeam BELLADONNA is lucky. I suspect that the zero rating was approved prior to HMRC change in policy that occurred in 2004/5. Before that HMCE readily accepted the 1994 Everett Tribunal ruling and issued letters to potential purchasers indicating that their vessel would be zero rated. These were then used by the builder with his accountant/local VAT office to follow through the zero rating.

 

20489 is also an oddity and at variance with the definitions in the Merchant Shipping Act/SI 1997/1510 of where the “upper deck” is and what part of the hull is watertight. I’m surprised that HMRC did not appeal it, but perhaps it is all part of Nu Labour’s increased spending in North England!!

 

Getting a reply from the Written Enquiries is the first step. Next is to ask for a ruling in accordance with Notice 700/6.

 

The final step is to take the case to a VAT Tribunal. But be careful. The John Grieve Tribunal failed to rule that HILDE was not designed for recreation and pleasure as the appeal was not allowed on a legal misinterpretation. HILDE would now find it useful to have at least a “not R&P” ruling from a court.

 

Having an RCD plaque is probably fatal to a case. RCD only applies to craft “intended for sports and leisure purposes".

 

Colin Stone

www.luxe-motor-kei.co.uk

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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. :lol:

 

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. :lol:

 

 

Hi Gary,

 

I’ve been following this topic carefully and want to thank you for the very informative and detailed posts concerning the recent court rulings relating to VAT on ‘qualifying vessels’. Because I suspect that my own particular vessel, a 60’ x 11’ widebeam (built 2006) which my wife and I live on, fits the relevant criteria for zero rating I have recently written (twice!) to HMRC requesting further information and guidance on our particular situation. They have been extremely slow in responding in detail to my enquiry and I hope that this is only due to the delays in implementing the new guidance since the latest court ruling.

 

I am still not absolutely clear, however, as to which measurements should be used in determining the depth for the gross tonnage calculation. I have read that the measurement is from the bass plate to the underside of the gunnel (the steps) in the case of narrowboats and widebeams. However, in the Richard John Fee T/A Swiftcraft Boats court case the judgement relating to depth was that:

 

‘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…’

 

In view of the above, is it your understanding that HMRC now accept the bottom to top of boat measurement as suitable for the calculation of gross tonnage, or, will they only accept the measurement to the gunnel?

 

I presume that only the multiplier of 0.16 is allowable for vessels under 24m. Are there any exceptions to this that you know about?

 

Once again thanks for a very informative thread.

 

Paul Sylvan

.

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Hi Gary,

 

I've been following this topic carefully and want to thank you for the very informative and detailed posts concerning the recent court rulings relating to VAT on 'qualifying vessels'. Because I suspect that my own particular vessel, a 60' x 11' widebeam (built 2006) which my wife and I live on, fits the relevant criteria for zero rating I have recently written (twice!) to HMRC requesting further information and guidance on our particular situation. They have been extremely slow in responding in detail to my enquiry and I hope that this is only due to the delays in implementing the new guidance since the latest court ruling.

 

I am still not absolutely clear, however, as to which measurements should be used in determining the depth for the gross tonnage calculation. I have read that the measurement is from the bass plate to the underside of the gunnel (the steps) in the case of narrowboats and widebeams. However, in the Richard John Fee T/A Swiftcraft Boats court case the judgement relating to depth was that:

 

'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…'

 

In view of the above, is it your understanding that HMRC now accept the bottom to top of boat measurement as suitable for the calculation of gross tonnage, or, will they only accept the measurement to the gunnel?

 

I presume that only the multiplier of 0.16 is allowable for vessels under 24m. Are there any exceptions to this that you know about?

 

Once again thanks for a very informative thread.

 

Paul Sylvan

.

 

The multiplier will not be subject to negotiation.

 

I think you will find if you stick to the under the gunnels measurement 60' x 11' will qualify anyway provided it is not based on a narrowboat design using standard narrowboat side sheets with very low gunnel's.

 

If it is a "fat" narrowboat design then you might still have a get out clause because the guidance to measure to the gunnels is specific to narrowboats which it obviously is not.

 

That leaves you to prove that the coach roof is the deck in the way that Mr Fee demonstrated, now on most narrowboats the steps/gunnels discussed in that case are even narrower than dimensions he presented.

 

It will be a battle to get your VAT back and the biggest hurdle will be convincing the boatbuilder to "bang heads" with HMRC on your behalf because there isn't really anyway you can do it directly.

 

I don't think HMRC will want to "play nice" because giving concession to barges qualifying is one thing but opening the flood gates to all the other variations of boats both broad and narrow would probably be rather an upsetting thought to them.

 

If the boat is based around a "fat" narrowboat design then it may still be worth pushing hard to see what you can achieve.

 

I would consider getting a good number of residential owners of similar boats together to add weight to the battle. It would then be a good starting point if enough of you were then to ask the same questions of HMRC and then who knows what might happen?

 

Anway good look with it! Only time and the mood of HMRC will tell! :lol:

Edited by Gary Peacock
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The multiplier will not be subject to negotiation.

 

I think you will find if you stick to the under the gunnels measurement 60' x 11' will qualify anyway provided it is not based on a narrowboat design using standard narrowboat side sheets with very low gunnel's.

 

If it is a "fat" narrowboat design then you might still have a get out clause because the guidance to measure to the gunnels is specific to narrowboats which it obviously is not.

 

That leaves you to prove that the coach roof is the deck in the way that Mr Fee demonstrated, now on most narrowboats the steps/gunnels discussed in that case are even narrower than dimensions he presented.

 

It will be a battle to get your VAT back and the biggest hurdle will be convincing the boatbuilder to "bang heads" with HMRC on your behalf because there isn't really anyway you can do it directly.

 

I don't think HMRC will want to "play nice" because giving concession to barges qualifying is one thing but opening the flood gates to all the other variations of boats both broad and narrow would probably be rather an upsetting thought to them.

 

If the boat is based around a "fat" narrowboat design then it may still be worth pushing hard to see what you can achieve.

 

I would consider getting a good number of residential owners of similar boats together to add weight to the battle. It would then be a good starting point if enough of you were then to ask the same questions of HMRC and then who knows what might happen?

 

Anway good look with it! Only time and the mood of HMRC will tell! :lol:

 

 

Thanks, Gary, for your reply and advice. Our boat is an Aqualine widebeam and I think it more accurately fits your description of a ‘fat’ narrowboat with the gunnel 1.11 metres above the bass plate. As the interior living space with its increased depth to the coach roof is only 44 feet in length, would it be correct to still consider the overall length of the boat to be 60 feet for calculation purposes? Or should I, as I suspect, do two separate calculations, the first to gunnel height across the entire length of the boat and the second from gunnel height to coach roof for the 44 foot section considering that part as a ‘break’ with its subsequent different multiplier?

 

I know of a number of people who are in a similar situation to us and your suggestion seems a positive way forward. However, I think I need to be a little more convinced of our case before getting lots of other boaters too excited!

 

Paul

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Thanks, Gary, for your reply and advice. Our boat is an Aqualine widebeam and I think it more accurately fits your description of a 'fat' narrowboat with the gunnel 1.11 metres above the bass plate. As the interior living space with its increased depth to the coach roof is only 44 feet in length, would it be correct to still consider the overall length of the boat to be 60 feet for calculation purposes? Or should I, as I suspect, do two separate calculations, the first to gunnel height across the entire length of the boat and the second from gunnel height to coach roof for the 44 foot section considering that part as a 'break' with its subsequent different multiplier?

 

I know of a number of people who are in a similar situation to us and your suggestion seems a positive way forward. However, I think I need to be a little more convinced of our case before getting lots of other boaters too excited!

 

Paul

 

You begin to tread in difficult ground here if you consider the living space to be a break then you imply that it a deck structure so it's roof can't really be the deck can it?

 

The guidance (Remember that is all it is!) only makes specific provision for where the measurement of depth should be taken in narrowboats for other vessels the general rules apply. (and probably in law do too narrowboats) So you need to consider the wording of the guidance for the length measurement (the full hull) and for depth if you consider the roof to be a deck then that is your measurement.

 

Remember a break is a raised portion of deck not a low portion of deck you need to look at the Ricard Fee tribunal to see how he demonstrated his beliefs to the VAT tribunal. (Some would say he was incorrect but HMRC did not appeal the decision)

 

Considering the volume of boats the New boat Co sell and have sold it might be worth asking them if they along with their customers would like to get on board for the battle.

 

It's a shame it isn't a barge because it would in theory be a lot simpler with calculation criteria clearly met.

Edited by Gary Peacock
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Thanks, Gary, for your reply and advice. Our boat is an Aqualine widebeam and I think it more accurately fits your description of a ‘fat’ narrowboat with the gunnel 1.11 metres above the bass plate. As the interior living space with its increased depth to the coach roof is only 44 feet in length, would it be correct to still consider the overall length of the boat to be 60 feet for calculation purposes? Or should I, as I suspect, do two separate calculations, the first to gunnel height across the entire length of the boat and the second from gunnel height to coach roof for the 44 foot section considering that part as a ‘break’ with its subsequent different multiplier?

 

I know of a number of people who are in a similar situation to us and your suggestion seems a positive way forward. However, I think I need to be a little more convinced of our case before getting lots of other boaters too excited!

 

Paul

 

I recommend reading the Statutory Instrument 1996/1510 and in particular the definitions:

 

Some definitions from SI 1997/1510:

 

"breadth" means the maximum breadth of the ship, measured amidships to the moulded line of the frame in a ship with a metal shell and to the outer surface of the hull in a ship with a shell of any other material;

"break" means the space bounded longitudinally by a side to side upward step in the lowest line of the upper deck and another such step or the end of the ship, transversely by the sides of the ship and vertically by the higher part of the deck and the lowest line of the upper deck continued parallel thereto;

 

"length overall" means the distance between the foreside of the foremost fixed permanent structure and the afterside of the aftermost permanent structure;

 

"moulded depth", and in the case of a ship of less than 24 metres "depth", means the vertical distance measured from the top of the keel of a metal ship, or in wood and composite ships from the lower edge of the keel rabbet, to the underside of the upper deck at side, or, in the case of a ship which is not fully decked, to the top of the upper strake or gunwale, provided that -

 

(a) where the form at the lower part of the midship section is of a hollow character, or where thick garboards are fitted, the distance is measured from the point where the line of the flat of the bottom continued inwards cuts the side of the keel;

 

(:lol: in the case of a glass reinforced plastic ship where no keel member is fitted and the keel is of open trough construction, the distance is measured from the top of the keel filling, if any, or the level at which the inside breadth of the trough is 100 millimetres, whichever gives the lesser depth;

 

© in ships having rounded gunwales, the distance is measured to the point of intersection of the moulded lines of the deck and side shell plating, the lines extending as though the gunwales were of angular design; and

 

(d) where the upper deck is stepped and the raised part of the deck extends over the point at which the moulded depth is measured, the distance is measured to a line of reference extending from the lower part of the deck along a line parallel with the raised part; and for the purposes of this definition -

 

 

 

(i) "upper deck" means the uppermost complete deck exposed to weather and sea, which has permanent means of weathertight closing of all openings in the weather part thereof, and below which all openings in the sides of the ship are fitted with permanent means of watertight closing. In a ship having a stepped upper deck, the lowest line of the exposed deck and the continuation of that line parallel to the upper part of the deck is taken as the upper deck; and

 

I do not believe that the "cabin roof" can be legitimately claimed as upper deck of a vessel unless the openings in the ends and sides meet the watertight closing criteria.

 

(ii) "weathertight" means that in any sea conditions water will not penetrate into the ship;

And the tonnage calculation:

 

The tonnage of a ship shall be the sum of -

 

(a) the product of multiplying together its length overall, extreme breadth over the outside hull and depth in metres and multiplying the resultant figure by 0.16; and

 

(:lol: the tonnage of any break or breaks, calculated for each break by multiplying together its mean length, mean breadth and mean height in metres and multiplying the resultant figure by 0.35.

 

 

As I have said earlier, the 20489 Tribunal seems odd and I am amazed that HMRC did not appeal it.

 

Also as I have said before, bite the bullet and ask HMRC for a written ruling having given them all the details as required in VAT Notice 700/6. You may well have to draft such a letter from your chosen boat builder to send as HMRC invariably hide behind the fact that the issue lies with the supplier and not the customer.

 

Speculating here on the VAT status from various opinions probably won't help - and no company is going to either zero rate or claim VAT back on the basis on the advice given on this forum.

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It's a shame it isn't a barge because it would in theory be a lot simpler with calculation criteria clearly met.

 

Surely Paul's 60' x 11' widebeam is a barge?

 

Paul, if you ever get your head around this, decide to do something and you and want to approach NBC with other customers in a sort of "class action" please let me know (PM me).

 

Mine is a 2005 57' x 12' widebeam.

 

Cheers

 

Mike

Edited by blackrose
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The biggest problem you face here is that the moral argument for the zero rating in a similar way to land based residences is very valid but-

 

The problem is that the "qualifying ship" for VAT purposes was never intended to facilitate this, it is a loophole in the system that can at the moment be legally used by some boats that can comply with its requirements.

 

The only other option is the conditions under which the supply of caravans and houseboats may be zero-rated for the purposes of VAT and this is where the Tug & Butty bit comes in.

 

The problem is that HMRC would like an house boat to be -

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.

Many moons back the practise of not fitting an engine to make it a houseboat was common and if you needed to move you put on the outboard to do so.

 

HMC later took a dim view on this practise and improved the guidance to include-

 

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.

 

 

 

Now the Tug & Butty combination seems attractive to builders and buyers for various reasons. For the builder the Butty/Houseboat is not subject to the expense of conformity to RCD so profits are increased and for the customer they save 17.5% on that cost.

There are also quite a few restrictions on what is and is not zero rated in the supply of a houseboat compared to the qualifying ship route that gave near complete zero rating.

 

 

So really the campaign in my view should be for a change in the law to facilitate some form of VAT relief on residential boats of all flavours rather than trying to exploit the loopholes in the existing tax policy?

Edited by Gary Peacock
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A few comments:

 

>The problem is that the "qualifying ship" for VAT purposes was never intended to facilitate this, it is a loophole in the system that can at the moment be legally used by some boats that can comply with its requirements.

 

It is not a loophole in the system. It is only the manner in which Parliament decided to implement the original VAT law in 1972 - read Hansard. The law has not been changed since and perhaps should have been when we joined the EU or at least reviewed since we joined. Interesting Finland, I think, had a very similar zero rating for non recreational and pleasure ships - they had over 10m rather than 15 tons. On joining the EU they were given a derogation for a few years. However, EU also had no problems in 1981 with our QS test when EU took UK to court over a number of zero rating clauses.

 

>Now the Tug & Butty combination seems attractive to builders and buyers for various reasons. For the builder the Butty/Houseboat is not subject to the expense of conformity to RCD so profits are increased and for the customer they save 17.5% on that cost.

There are also quite a few restrictions on what is and is not zero rated in the supply of a houseboat compared to the qualifying ship route that gave near complete zero rating.

 

Some saving si better that no saving?? RCD does not apply to residential powered craft - from the directive:

 

2. ‘Recreational craft’ shall mean any boat of any type, regardless of the means of propulsion, from 2.5 to 24 m hull length, measured according to the appropriate harmonised standards intended for sports and leisure purposes.

 

The same phrase is also in UK law. RCD was intended to regulate the mass of small plastic boats into the EU - and even now the odd boats gets in under false pretences.

 

Just about everyone, inc HMRC, accepts that residential design and use is not the same as recreation/sports/leisure design and use. HMRC wrote to me in my VAT Assessment "your vessel has been designed and built for residential purposes" and never tried to retract that. But because it had an engine HMRC decided it must then be rec and pleasure.

 

>So really the campaign in my view should be for a change in the law to facilitate some form of VAT relief on residential boats of all flavours rather than trying to exploit the loopholes in the existing tax policy?

 

This will never happen. Any change in UK law will have to reflect the EU VAT Directive and be implemented following the principles in EU law - read up on the Marleasing principle. We are not going to be able to change an EU Directive in which the whole purpose is tax harmonisation across the EU.

 

As to class actions - this was tried in the HILDE VAT Tribunal and failed. Largely because they did not use counsel.

 

It is very simple. Read 1997/1510. Write to HMRC with all details for a written ruling on vessel. If neccessary use a nom de plume - as I have done to see what their current reply is. If you do not like the reply, go to a VAT Tribunal. The only problem is that you might have to get a builder involved and they might not be that interested.

 

Colin Stone

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How very interesting... (not that I currently live on a narrow boat or for that matter intend to).

 

I do however have a number of HMRC High Court and Tribunal cases under my belt.

 

On that basis I would offer a few comments based on my experience:

 

1) HMRC (VAT) guidance notes and notices are just that, they are not to be confused with the law. HMRC however consider that their internal procedural documentation is the law and will operate on that basis. They do not seem to have any system of internal appeal and so to challenge a decision it is necessary to do so in the High Court or at a Tribunal.

 

2) Although it is difficult, a VAT tribunal is actually the taxpayers best friend. The Chairman will listen carefully to the case presented and give a fair decision along with a detailed justification of it. They will give all the time necessary to present a case and rarely prevent a point being made even when only vaguely relevant or quite rambling. When faced with a taxpayer in person representing their own case they will tend to give the benefit of the doubt and even on occasions lead them to present their case most effectively. They seem to be genuinely interested in fairness and the application of the law as Parliament intended it.

 

3) High Court hearings are best avoided, the quality of justice is arbitrary, the time allowed is very short (I have seen some cases decided in less than a minute) and the basis of the decision will, by default, be on the strict application of the law regardless of the justice of it. They operate on the assumption that if you are unhappy you can always appeal. It seems to me that the High court is for deciding matters of law and the appeal court is for deciding matters fo Justice.

 

4) Any effort to change the law that would result in less tax revenue is almost inevitably doomed to failure; the weight of opposition from the Treasury would swamp it. Without significant political support it is not going to happen and it would not be in the interest of any political party or lobby group to provide this.

 

5) The "floodgates" argument is always very interesting. This is usually a tacit acceptance that they fully realise that what is being done is unfair and/or unreasonable and/or illegal but that they intend to continue doing it. It means that they know that the argument is ultimately untenable but do not intend to back off unless forced to do so. It is the argument used by bullies and tyrants worldwide since the start of civilisation. It is official speak for “if you think you are big enough, go on!” You are in for a fight if you take it up but given you have the staying power you may well win.

 

6) As I understand it, any structure intended for and used as a persons primary place of residence should not be subject to V.A.T. Attempts by HMRC to define this in terms of merchant tonnage are specious and should ideally be dismissed out of hand, the relevant law does not presume any system of measurement. I think that a boats displacement weight would be more appropriate despite HMRC's Public Notice. I cannot see what relevance the merchant shipping regulations have to a principal place of residence that does not carry cargo. If you live on a boat, you live on a boat. Providing you live there more than half the year it is by definition your primary place of residence. I doubt that your local tax exile would get away with claiming that they were not resident if they stayed in a narrow boat! Perhaps a letter to HMRC asking if, as someone who lives on a narrow boat, you are exempt from income tax as "non resident" would prompt some clarification!

 

7) The fact that a narrow boat is capable of being used for "recreation" or "pleasure" is frankly irrelevant. If a climbing enthusiast builds a house in the Highlands of Scotland with a view to die for, the fact that they derive pleasure from it or built it where they did to enable "recreational" use is not taken into consideration. If a Yachting enthusiast builds a house (with a slipway) etc. etc. It is not what ancillary purpose or benefit your choice of principal residence conveys that matters it is whether it is your principal place of residence and if that was the intention. I really struggle to see what part of "live aboard" needs clarification.

 

8) I think that the matter or its means of propulsion is irrelevant regardless of if this propulsion system is a part of the residence or easily added. I cannot see any definition of residence that precludes it being mobile.

 

9) <HM Revenue & Customs are currently considering how best to

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

forward.> Chilling! I interpret this as “if you (or anyone else) don't like the way we enforce the rules, we will just change them!. It is indicative of the ethos of HMRC as a government agency to maximise revenue collection regardless of the law rather than a Crown Department to enforce the law.

 

10) It has been said earlier, the 20489 Tribunal seems odd and it was amazing that HMRC did not appeal it. I disagree, I think that this decision is a very good example of a Tribunal considering the evidence placed before it as well as the fairness of the situation and coming to a decision that set no precedent but was at the same time equitable. It is an historic legal principle that if common law and equity conflict then equity should prevail as this explains.

 

I could go on and on here but in essence, the subject of this topic is fairly typical of HMRC hypocrisy and the more this sort of thing is not challenged, the more it will go on. Well done Richard Fee, the judgement carries the weight of a High Court decision and should be read very carefully -

<(some of whom do what might be, somewhat incorrectly, described as peripatetic work on the canals)> – very droll!

HMRC seem to hate Tribunals and will go to some lengths to be reasonable when faced with the possibility, if as a "trader" (HMRC speak for the "enemy") you have a stalemate with HMRC over an issue you think they are being unreasonable about just try asking them for a decision letter and an application form for a Tribunal. They will about face so quickly they risk snapping their necks!

 

Regards

 

Arnot

Edited by Arnot
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How very interesting... (not that I currently live on a narrow boat or for that matter intend to).

 

I do however have a number of HMRC High Court and Tribunal cases under my belt.

 

On that basis I would offer a few comments based on my experience:

 

1) HMRC (VAT) guidance notes and notices are just that, they are not to be confused with the law. HMRC however consider that their internal procedural documentation is the law and will operate on that basis. They do not seem to have any system of internal appeal and so to challenge a decision it is necessary to do so in the High Court or at a Tribunal.

 

2) Although it is difficult, a VAT tribunal is actually the taxpayers best friend. The Chairman will listen carefully to the case presented and give a fair decision along with a detailed justification of it. They will give all the time necessary to present a case and rarely prevent a point being made even when only vaguely relevant or quite rambling. When faced with a taxpayer in person representing their own case they will tend to give the benefit of the doubt and even on occasions lead them to present their case most effectively. They seem to be genuinely interested in fairness and the application of the law as Parliament intended it.

 

3) High Court hearings are best avoided, the quality of justice is arbitrary, the time allowed is very short (I have seen some cases decided in less than a minute) and the basis of the decision will, by default, be on the strict application of the law regardless of the justice of it. They operate on the assumption that if you are unhappy you can always appeal. It seems to me that the High court is for deciding matters of law and the appeal court is for deciding matters fo Justice.

 

4) Any effort to change the law that would result in less tax revenue is almost inevitably doomed to failure; the weight of opposition from the Treasury would swamp it. Without significant political support it is not going to happen and it would not be in the interest of any political party or lobby group to provide this.

 

5) The "floodgates" argument is always very interesting. This is usually a tacit acceptance that they fully realise that what is being done is unfair and/or unreasonable and/or illegal but that they intend to continue doing it. It means that they know that the argument is ultimately untenable but do not intend to back off unless forced to do so. It is the argument used by bullies and tyrants worldwide since the start of civilisation. It is official speak for “if you think you are big enough, go on!” You are in for a fight if you take it up but given you have the staying power you may well win.

 

6) As I understand it, any structure intended for and used as a persons primary place of residence should not be subject to V.A.T. Attempts by HMRC to define this in terms of merchant tonnage are specious and should ideally be dismissed out of hand, the relevant law does not presume any system of measurement. I think that a boats displacement weight would be more appropriate despite HMRC's Public Notice. I cannot see what relevance the merchant shipping regulations have to a principal place of residence that does not carry cargo. If you live on a boat, you live on a boat. Providing you live there more than half the year it is by definition your primary place of residence. I doubt that your local tax exile would get away with claiming that they were not resident if they stayed in a narrow boat! Perhaps a letter to HMRC asking if, as someone who lives on a narrow boat, you are exempt from income tax as "non resident" would prompt some clarification!

 

7) The fact that a narrow boat is capable of being used for "recreation" or "pleasure" is frankly irrelevant. If a climbing enthusiast builds a house in the Highlands of Scotland with a view to die for, the fact that they derive pleasure from it or built it where they did to enable "recreational" use is not taken into consideration. If a Yachting enthusiast builds a house (with a slipway) etc. etc. It is not what ancillary purpose or benefit your choice of principal residence conveys that matters it is whether it is your principal place of residence and if that was the intention. I really struggle to see what part of "live aboard" needs clarification.

 

8) I think that the matter or its means of propulsion is irrelevant regardless of if this propulsion system is a part of the residence or easily added. I cannot see any definition of residence that precludes it being mobile.

 

9) <HM Revenue & Customs are currently considering how best to

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

forward.> Chilling! I interpret this as “if you (or anyone else) don't like the way we enforce the rules, we will just change them!. It is indicative of the ethos of HMRC as a government agency to maximise revenue collection regardless of the law rather than a Crown Department to enforce the law.

 

10) It has been said earlier, the 20489 Tribunal seems odd and it was amazing that HMRC did not appeal it. I disagree, I think that this decision is a very good example of a Tribunal considering the evidence placed before it as well as the fairness of the situation and coming to a decision that set no precedent but was at the same time equitable. It is an historic legal principle that if common law and equity conflict then equity should prevail as this explains.

 

I could go on and on here but in essence, the subject of this topic is fairly typical of HMRC hypocrisy and the more this sort of thing is not challenged, the more it will go on. Well done Richard Fee, the judgement carries the weight of a High Court decision and should be read very carefully -

<(some of whom do what might be, somewhat incorrectly, described as peripatetic work on the canals)> – very droll!

HMRC seem to hate Tribunals and will go to some lengths to be reasonable when faced with the possibility, if as a "trader" (HMRC speak for the "enemy") you have a stalemate with HMRC over an issue you think they are being unreasonable about just try asking them for a decision letter and an application form for a Tribunal. They will about face so quickly they risk snapping their necks!

 

Regards

 

Arnot

 

Arnot,

 

I found your comments extremely interesting, and, am not a boat owner yet, I'm sure your observations will cause more than a couple of peeps to rethink the situation , and maybe even progress with a class action.

 

Thank you

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