UK Yacht VAT – Changes to Returns Relief have become UK law
The UK Government has delivered on its promise to make a positive change to the application of Returned Goods Relief (RGR) for pleasure craft which has meant that many boat owners will no longer be required to pay VAT when of the return of their boats to the United Kingdom.
HM Revenue and Customs (HMRC) acted on these proposed changes and the proposed changes have now become law. The relevant regulatory instrument (Customs (Reliefs from a Liability to Import Duty and Miscellaneous Amendments) (EU Exit) Regulations 2020) was filed with the Library of the House of Commons on 16 December 2021, with an effective date on December 28, 2021 and was the subject of the “negative procedure”. This means that it becomes law unless either House cancels them within a fixed 40-day period (when the House is sitting). The 40-day period expired on February 23, 2022 without any objection from either Chamber and the Statutory Instrument therefore entered into force.
The Cruising Association says the changes have significant benefits for the UK-based cruise community:
Where a boat currently overseas is eligible for VAT relief via RGR, it will not be necessary to return the boat to the UK until June 30, 2022 to obtain it. As long as an owner can demonstrate that the boat was located in the UK at some point during its ownership, the RGR for boats will not be time limited, and
UK-based boat owners who are subject to VAT will be able to take extended cruises without worrying that VAT will become payable when they bring the boat back to the UK at the end of the cruise.
With the proposed changes to UK law, the cruise community will be able to enjoy cruises outside the UK for extended periods of time with the assurance that they will not incur additional UK VAT charges, if the following conditions are met: fulfilled:
- the person importing the boat into the UK is the person who originally exported it,
- the boat will be used in the UK for non-commercial purposes, and
- the boat is substantially unchanged during his absence.
For absences from the UK of more than 3 years, an application must be made to HMRC for a waiver, but HMRC has advised that waivers will routinely be provided as long as the conditions are met. It is not necessary to demonstrate exceptional circumstances to justify why the return did not take place within 3 years.
Unfortunately, the situation of owners who bought their boats with VAT paid in the EU and never brought them to the UK has not yet been resolved.
VAT will still be due on the value of these boats when imported into the UK. The Cruising Association continues to work with HMT and HMRC to find a solution to this problem. Cruising Association Chairman Derek Lumb recently wrote to Her Majesty’s Treasury Financial Secretary Lucy Frazer QC asking her to address this issue.