It has now been confirmed that we will lose our boat’s VAT-paid status in Europe on Brexit day, leaving us with only the possibility of a temporary importation licence for up to 18 months.
Only British boats actually kept in the EU on that day will be treated as if the VAT paid on them in the UK is still European VAT. If they are in the UK on Brexit day, then they lose that ‘union goods’ status and can only apply for temporary importation.
For summer cruise visitors, 18 months is more than enough. But anyone planning to go to the continent for several years, for example to the Med, faces an annoying obstacle. Every second season they will have to leave the EU for Turkey, Montenegro, Albania or Gibraltar (I’
m ruling out North Africa) to avoid a heavy VAT bill.
With our engine out at the moment, there is no prospect of getting to France by 29 March to secure our VAT status. But there would be if Brexit is delayed or indeed if the Government’s EU deal were finally accepted, because we would keep EU goods status during the transition period.
Food for thought. We may not go to the Med ourselves, but maintaining EU VAT status surely adds to the long term value of a boat because it will have more options for cruising.
Next we need to know how long a boat can be away from the UK without losing its UK VAT-paid status. It may be that trips to the Med will have to be indefinitely long to avoid a financial hit on returning home. Under current EU rules, the VAT-paid status is lost after three years.
Here is part of the text of a letter to the Cruising Association (which is well ahead of the RYA on these issues – all cruising sailors should join it) from the European Commission
‘Consequences of the UK’s withdrawal from the EU on recreational boats will concern not only customs but also have an indirect tax dimension. The relevant legal bases to which will be
further referred in this letter are: the Union Customs Code (UCC) – Regulation (EU) 952/2013 (OJ L 299/1 of 10.10.2013) – the supplementing Commission Delegated Regulation (EU) 2015/2446 (UCC-DA) (OJ L 343/1 of 29.12.2015) and the Commission Implementing Regulation (EU) 2015/2447 (UCC-IA) (OJ L 343/558 of 29.12.2015) for the customs issues. For indirect taxes it concerns the Council directive 2006/112/EC (the VAT Directive) (OJ L 347/1 of 11.12.2006).
Where the recreational boat has been released for free circulation at import in the EU or has been manufactured in the EU, it has obtained the customs status of Union goods.
After the UK’s withdrawal from the EU or the end of the transition period in case a Withdrawal Agreement with a transition period is concluded, in general, any goods in the customs territory of the UK will lose their Union status and will become UK goods. This was also mentioned in a Brexit preparedness note from the Commission, published on 30 January 2018:https://ec.europa.eu/info/sites/info/files/file_import/customs_and_indirect_taxation_en.pdf. Following the Brexit preparedness notice mentioned above, a specific notice on VAT was published on 11 September 2018: https://ec.europa.eu/info/sites/info/files/value-added-tax_en.pdf.
The customs status of a UK boat will depend on its location at that point in time: if the boat is located in an EU port or sails in EU territorial waters, it will keep its Union status; if the boat is located in the UK, its status will be that of a third-country boat when arriving in the territorial waters of the Union, i.e. it will be treated as non-Union goods. Customs controls for such UK boats will be the same as for boats coming from a third country’.