The Cruising Association announces an update on UK Government VAT rules for UK boat owners

The Cruising Association © CA

Following a meeting with HM Treasury (HMT) and HM Revenue and Customs (HMRC), the Cruising Association (CA) is pleased to confirm that the UK Government will make a positive change to the application of Returned Goods Relief (RGR) for recreational craft. As a result, many boat owners will no longer have to pay VAT on the return of their boats to the UK.

The proposed change has considerable benefits for the UK based cruising community:

• Where a boat currently abroad is eligible to obtain relief from VAT through RGR, there will be no requirement to return the boat to the UK by 30 June 2022 in order to obtain this. As long as an owner can demonstrate that the boat has been located in the UK at some point in their ownership, RGR for boats will not be time limited, and
• Owners of UK-based boats which are VAT paid will be able to go on extended cruises without the worry that VAT may become payable when they return the boat to the UK at the end of the cruise.

These changes are a major step forward. For over three years, the Cruising Association and its Regulations and Technical Services group (RATS) have been working with stakeholders and UK Government Departments (HMT, HMRC) on the VAT implications and other freedom of movement related issues for cruising sailors arising from the UK leaving the European Union (EU).

With the UK Government confirmation, subject to final legislation, the cruising community will continue to enjoy cruising between the UK and the EU for extended periods assured they will not incur additional UK VAT charges, if the following conditions are met:

• 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 unmodified during its absence.

For absences from the UK of more than 3 years you will have to apply to HMRC for a waiver, but this will no longer be discretionary. There will be no need to show exceptional circumstances to justify why the return did not occur within 3 years.

In essence, the HMRC practice over many years to grant waivers to the payment of VAT on the import of a boat back to the UK following longer term voyages will be codified into law. Once the final revised guidance and legislation has been published it will be shared on the Cruising Association website at www.theca.org.uk.

Unfortunately, the situation for owners who bought their boats VAT paid in EU and have never brought them to the UK has not yet been resolved. VAT will still be payable on the value of these boats when they are imported into the UK. The Cruising Association will continue to engage with HMT and HMRC to work on a solution to this problem.

Derek Lumb, President of the Cruising Association, commented, "Along with other organisations, the CA has actively campaigned over the last three years for the removal of punitive tax arrangements relating to the passage of recreational craft between the UK and the EU. It has been a wide-ranging campaign and I would like to thank the dedicated band of volunteers who have spearheaded the CA's hard work and the many members who supported it by, amongst other actions, writing to their Members of Parliament. The CA is delighted that HM Revenue and Customs and HM Treasury have reacted positively to our representations, which has resulted in huge strides in reversing some of the unintended consequences of RGR for recreational boat owners. We will continue the campaign for those boat owners who remain affected.

"The Cruising Association has rightly played its part in delivering a solution and we really appreciate the openness in our dialogue with UK Government departments to achieve the progress that has been made.

"The CA represents yacht and motor cruisers around the world and it is our responsibility to engage with national and international government and legislative bodies to address matters of concern to cruisers."

As part of the CA's package of 'know how' supporting cruisers on the issues arising from the UK leaving the EU, a webinar will be held at 1000 hours UTC on Saturday 22 January 2022 to address topics including: people issues (including the 90 / 180 day rules), VAT issues and the Recreational Craft Directive, along with a Q&A session. The live webinar is for CA members and invited media only. Afterwards a recording of the webinar will be made publicly available on the CA website. This webinar is a follow-up to our first 'Brexit Issues for Cruisers' webinar held on 5 December 2020.