My client who trades as a yacht surveyor in the UK is considering purchasing a yacht hull ( approx £60,000 ) and building a yacht in this country . He wonders if we will be able to recover the input vat on the various material costs and sees this as highly attractive . The intention is to operate the yacht in the Med skippering for paying customers . He wonders if it would make sense for him to register the business overseas . By doing so could he reduce overall tax on the business's revenue streams ? Also in doing so is there anyway he could still recover the UK input vat ?
Iain Allan
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Just goes to show...
...why those who know how to do it can earn such big fees on this sort of thing!
I see...
... that Mr Sartoris' self-important flatulence seems to be in good form this afternoon!!!!
Is it a genuine business??
Several years ago now I conducted a VAT appeal on behalf of a client who did this very thing, although in this particular case his company bought an older yacht, refurbished it, recovered the VAT and chartered it in the Med.
Trouble was, C&E viewed it as being the director's hobby and argued that it was not a genuine business activity, assessed him for a pile of VAT, and we then all trooped off to the VAT tribunal.
And yes, we lost, the chairman was also not convinced it was a genuine business activity either.
Aha!!
An insult and a compliment ('good form') all in one sentence.
Very well!
I accept the compliment but ignore the insult!
Yes.
If it is your client's genuine intention to use the yacht for a business purpose* then he can reclaim the VAT on the cost of construction. If he is resident in the UK he is entitled to register for VAT in the UK to recover the input VAT even though all of his business activities will be outside the UK.
If his chartering activities occur within the EU then it is likely he will have to register in the country / countries where they occur to account for VAT on the charter fees.
*HMRC do not view the single long term lease of a yacht to a "charter agency" as a business activity but an investment activity. If this is the intended supply your client will not be able to register for VAT or reclaim VAT on costs.
Obviously, if there is any private use of the yacht you client will have to restrict the input VAT recovery or account for VAT on the use in the country where it occurs.
This is an extremely complex area of VAT and I would recommend your client seeks professional assistance in meeting his compliance requirements both in the UK and overseas.
Regards
Paul Taylor
VATease - VAT Advice
I am sure...
...I am not the only contributor to this forum who has had clients in similar situations and who have devised customised, tax-efficient ways of doing what your client proposes.
Possibly it may come as a surprise to you but the generally accepted way of getting the sort of bespoke, tax-planning advice your client requires is to pay someone like me a fairly large fee to provide it.
A possible drawback for your client may be that the tax advice fees would not be proportional to the cost of the hull. I would have to charge the same for the £60,000 hull as I do for the £5+ million ones.