17. UK VAT for Yachts Explained: Is the UK a Strategic Cruising Choice? | PKF Francis Clark & Berthon International Yacht Brokerage

About VAT – Is The UK A Strategic Cruising Choice? | PKF Francis Clark

VAT is one of the most discussed, and often misunderstood, areas of yacht ownership. In this episode of the Berthon Podcast, we take a closer look at whether the UK has become a genuinely strategic cruising choice from a tax and customs perspective.

Joining the conversation is Joe Francis, Director of VAT and Customs at PKF Francis Clark. With more than 20 years’ experience across a range of sectors, including marine, Joe brings a clear and practical view on how VAT is being applied in today’s post-Brexit landscape.

The starting point is simple. As Joe explains, “If the rules are applied correctly, the UK should offer multiple well-defined routes to manage VAT and customs exposure.” What follows is a detailed but accessible discussion on how those routes actually work in practice.

Temporary Admission remains one of the most important tools available to yacht owners entering UK waters. With the time limit now extended to 24 months, it offers a straightforward way for many non-UK flagged vessels to cruise without triggering import VAT, provided the conditions are met.

The conversation also explores some of the more nuanced areas that owners and brokers regularly encounter. One example is the commonly used “12-mile dip”. While this is generally accepted from a customs perspective to reset Temporary Admission, Joe highlights that it may not always qualify as a valid export for VAT purposes. As he puts it, “they may not accept that as an export for VAT purposes,” which can create significant exposure if relied upon incorrectly.

Returned Goods Relief is another area covered in detail. While it can allow a vessel to re-enter the UK without triggering VAT, the conditions are strict, particularly around maintaining the vessel in the same condition. Even relatively routine work can fall into a grey area, making early planning and proper documentation essential.

For commercially operated yachts, the position shifts again. Temporary Admission is generally not available, but alternative reliefs may apply, particularly where vessels are providing passenger transport. In some cases, this can allow operations to continue in UK waters without a formal import, depending on how the activity is structured.

The discussion also touches on one of the least understood areas of the current framework, Unfettered Access Relief under the Northern Ireland protocol. While complex, it can offer unique advantages in certain scenarios, including the ability to move vessels into Great Britain without triggering import VAT, although not without trade-offs.

As the episode makes clear, the UK’s VAT and customs position has evolved into something far more structured and, in many cases, advantageous. However, the detail matters. As Joe explains throughout, “you’ve got to plan it out,” because getting it wrong can result in significant and unnecessary cost.

This is a practical conversation around real scenarios, offering clarity on a topic that continues to shape buying, selling, and cruising decisions across the market.

PKF Francis Clark
Specialist VAT and tax advice for yacht owners, brokers and marine businesses.

Disclaimer: This post contains affiliate links. If you make a purchase, I may receive a commission at no extra cost to you.

Transcript

SPEAKER_03 0:33

Hey, how are you doing Tim? Alright, good morning, Joe. How are you? You good?

SPEAKER_00 0:36

Good thing. Can you hear me alright?

SPEAKER_03 0:38

Yeah, nothing bad at all.

SPEAKER_00 0:39

Not too bad at all.

SPEAKER_03 0:39

Okay, perfect. Yeah, this is this is my my first time, so. Like like anything, like anything the first time I'm slightly nerve of your band and I've got my handling on my shoulder and I've plu I'm plugged in like some sort of a robot.

SPEAKER_00 0:51

Brilliant. So have you had other contributors to the article when I'm doing the podcast as well? Like Ocean Skies. Did they do a podcast as well?

SPEAKER_03 0:59

They haven't done yet. Oh, okay. You're you're the fur you're the you're the first one from our articles. So it goes. Yeah, yeah, it'll be fine. So good morning and welcome to Berthon here in Lymington for our latest podcast. And I'm joined by Joe Francis from PKF, Francis Clark. Good morning, Joe. Good morning, team. So thank you for coming and joining us. Uh what we'd like to talk about today uh is VAT and whether the UK um is a strategic cruising choice for VAT. So you you very kindly did an article for us in our but in our marketing report, uh, and thank you for that. Uh it was very useful to have the VAT update, which everyone ought to read. And as you know, and everyone else should know, you are Berthon's go-to people for VAT advice. So please could you just walk through the services you guys offer?

SPEAKER_01 1:53

Of course I can. And team, first of all, thanks very much for having us on this um podcast. So just to set the scene, PKF Francis Clark is is uh a top 15 UK accountancy firm led by around 60 partners, supported by a team of just under a thousand. They provide a full range of accounts and audit services and tax as well. Okay. And within the firm we've got a range of specialist team. Myself and Richard are part of the uh Marine Vat and Customs specialist team. It's been in place well before Brexit, providing a range of support services to uh various marine stakeholders. Right. So just to quickly give you a feel, so for with British Marine, we uh we work closely with them to provide a BM indirect tax helpline. We work very closely with vessel owners and operators when they engage directly with individuals in in uh buying and operating and selling uh vessels within the UK overseas and various other marine suppliers that uh have a stake in the marine side of things as well. So we work we provide a whole range of services across the uh across the sector, ensuring that um VAT is efficient and leakage is is is minimum. Just one more area uh I should mention is that um we are often asked about what structure to buy vessel in. Yeah, and that typically uh arises where, say, for example, a prospective buyer is is looking for some finance and the finance company has stipulated that they should um buy through a corporate structure. Okay, and that could be a limited company or or a LLP. And whilst the VAT position is is usually um similar, the outcome is similar, the direct tax provisions can be a bit tricky, uh, namely the benefit and kind um provisions. Yeah, so it's it's something that we can provide advice on using our specialist tax colleagues.

SPEAKER_03 3:51

Okay, so that's uh an SPB, a special purpose vehicle, essentially.

SPEAKER_01 3:55

Exactly, exactly, yeah.

SPEAKER_03 3:56

Okay, fantastic. So in this year's article, um you featured the UK as a flexible and efficient tax base for both leisure and commercial operations. Uh, now that the Brexit tax and customs landscape are settled, um could you just discuss with this a little more, please, and give us a bit more information?

SPEAKER_01 4:13

Of course, yes, yes, yes, I can. So um, post-Brexit, the UK position, perhaps with some exception to Northern Ireland, yeah, is now much clearer. And if the rules are applied correctly, it should offer multiple well-defined routes to manage UK VAT and customs exposure for different yachting scenarios. Okay, so let's take for example leisure. This includes um temporary admission as a straightforward way for many non-UK flagged yachts to enter without any import VAT.

SPEAKER_02 4:42

Yeah, right.

SPEAKER_01 4:43

So, with the TA time limit now extended to 24 months, plus the um the various um TA that you can have for public events, very, very um viable. This route um provides you know um you to bring your boat in for ragattas and trade shows. Yeah, so it's it's it's it's a very valuable relief. And uh and of course we've got the return goods relief where in some cases the three-year time limit limit can be waived. Okay. So for commercial operations, the VAT accounts will depend on the nature of the activity, and we differentiate typically between bear boat charter, which would normally be standard rated, yeah, and passenger transport, which could be zero rated if the necessary conditions are met.

SPEAKER_03 5:27

Okay. Okay, so that's very interesting. So on the on the subject of uh TA or temporary admission in the UK, how does this compare to the European equivalent, would you say?

SPEAKER_01 5:36

Okay, well let's start over the UK position first, and the temporary admission, which is often referred to as TA rather than the full name. Okay. So what is it? So TA is actually a customs relief. It allows a non-UK vessel to enter and be used in UK waters without paying import and any duty for that front up front. Generally, if TA doesn't apply, you might be faced with declaring import VAT or paying import on enter entering the UK. Okay. So because the import is treated as temporary rather than a permanent import into the UK, free circulation, in practice it's most relevant where a yacht does not have UK bad paid cities. Yeah. So there are various conditions. I'll just quickly go through them to uh qualify for TA. So first you're looking at the person or entity that owns the yacht, they must be established outside the UK. The boat must be registered and flagged also outside the UK. And also the Isle of Man. Right. Which is which can be um sometimes dismissed.

SPEAKER_03 6:36

So the Isle of Man flag would cause an issue for temporary admission.

SPEAKER_01 6:39

Yeah. Yeah. Because the Isle of Man is in effect treated as part of the UK for fat purposes under Man's Law. So you wouldn't want to you wouldn't want to um have a yacht flag with uh um Island Man. So the next next one would be about the use of of that boat. It it must be for private recreational purposes, say while in the UK. And when used in the UK, it must be primarily used under the control of a person who's not UK resident. And we talked about the uh 18-month, it's it's now 24 months time limit now, which which is much more favorable than the EU. Yeah, okay. Okay. I should mention actually, um, when you're entering the UK under TA, you can have uh routine maintenance um carried out. You can be entering to um have refit works done. Uh there's a different process for that. So just to give you a feel for how it works in practice. So basically for most um prison yards, TA is effectively claimed by conduct that you simply arrive rather than getting any stamped documents. By contrast, in the EU, there isn't um a true equivalent to uh what is referred to as the EU Article 165. I don't know if you heard of that um document.

SPEAKER_03 7:48

No, I haven't.

SPEAKER_01 7:49

Basically, it it's it's an oral declaration which you can obtain and which is quite valuable, particularly when um you've got a New York very high value vessel. What we do have in the UK is the um SPCR form. You've heard of that, haven't you? Yes. So that when you're coming into the UK, you you'll complete that ahead of schedule, and um you should uh on exit also complete that. So that's generally how TA is is claimed in the UK. You just arrive and you claim it by conduct, and uh there's a couple of forms that you fill out. And and to reset the um time limits, generally on um leaving um UK waters, that's it, going beyond the 12 miles, you uh exit the um UK and then you reset the um time limits and then you can come back into the um UK and and and begin a new period.

SPEAKER_03 9:04

Okay. Yeah, it's that that leads me on to what was my next question. Uh and that a lot of people think that going into international waters is enough to reset a TA or indeed to sell a yacht. What is the case for the UK and also in the EU on that?

SPEAKER_01 9:20

Yeah, it's a bit confusing, and uh we've we've had um mixed uh messages from our own tax authorities and and and and we know that that is the same in i in the um in the EU as well. Okay, so let's take the UK first. So we know what what counts as the UK is 12 nautical miles, right? Yeah. So beyond that, you're outside of the UK, and generally to reset your temporary admission, which is a customs uh procedure, HMRC generally accept that 12 mile dip is fine. Okay, so you go out 12 miles, you come back, and uh that that is that's okay to reset the um time limits. And to f to be fair, we i it's been consistent on that point. HMR has been consistent about on that point. The the problem that we've come across is and and uh that's to somewhat reflected in the in the VAT notice, is when you're selling when you're exporting a a boat from the UK. So you if you're exporting a boat from the UK that would be zero rated, subject to um satisfying the uh export conditions, and one of those export conditions is that the boat must be removed from the UK. And this is where the uh question of well is is twelve miles evidence of an export. Yeah. The customs um CDS system allows for an export in international waters. But when you read HMRC's notice, it talks about to another customs territory. Okay. Or or something like uh an oil rig, which indicates that they will not accept that if you just go 12 miles out, do a transfer in international waters, and the um buyer brings it back in, they may not accept that it is an export for VAT purposes, right? Which of course means VAT is due and on a luxury asset that could be a massive VAT exposure, and you don't really want to have an argument with HMRC or any tax or threat for that matter of fact. So similar rules, similar approach taken in the EU, but interestingly, the various various countries accept 12 miles a day for both the customs and the VAT, and in some cases, uh particularly in France, if for example, you could be purchasing a yacht for export, and there's um there is in different parts of France. I I I think this this is exercise, the yacht doesn't actually have to leave the territory at all. Right. It can go directly from an export to a TA regime without it actually moving at all. Yeah. So that's we find that very unusual, but very practical at the same time. Yeah. Which uh our tax authorities will adopt that.

SPEAKER_03 11:52

So yeah, so that is different. So in in the past, I've done a lot of uh closings in international waters. Uh it's just a it's a simple case of uh an entry into the logbook um and some sort of evidential proof on the GPS of your coordinates.

SPEAKER_01 12:06

Yes.

SPEAKER_03 12:06

So if you're saying that that that might not be the case in the UK, then is that where uh an option of maybe going down to Guernsey would be beneficial?

SPEAKER_01 12:14

100%, yeah, yeah. We that's and that marks a different customs territory, doesn't it? Yeah. And so you you can have the uh evidence for that. But yeah, I mean the the the point is if there is going to be an export of of the boat and the the buyer is is going to be able to um return to the UK on the TA, yeah, you know, just thinking about the environment uh position, uh and you know, if this chap is buying a motorboat, he's got to go all the way to Guernsey just to um satisfy this condition and then he's free to come back here uh and burn up a lot of fuel in it in the meantime. So the French approach seems very practical and seems reasonable to me. So it would be great if it like extended in due course elsewhere.

SPEAKER_03 12:58

Okay, interesting. Uh and you briefly touched on this earlier, uh, the question of returned goods relief. Um can we just walk through what this is uh and how it's obtained and the three-year limit uh and how this works in the UK and of course against the EU? Sure, yeah.

SPEAKER_01 13:15

Okay, so RGR again is a customs relief that can switch off input butt. If you buy a boat here in the UK and then you pay VAT, you don't really want to be paying VAT on it again if you simply um sell out to the EU and then return. Okay? Yeah, and that's the idea behind um return goods relief. If the yacht was already VAT paid in the UK or any territory before it left and comes back broadly in the same hands and in the same condition, you should not have to pay in for VAT again just because it went cruising overseas. So that that's that's what's behind the relief. And you've got a set of conditions that you need to meet to be able to, just like the TA to get RGR. So generally it means that it you you must be able to prove the VAT status of the book. Okay, okay, and that can be tricky sometimes. Uh, but that's the first one. Yeah, you need you you need to be able to um not only prove the VAT status, but that that has remained in place intact.

SPEAKER_03 14:09

Right.

SPEAKER_01 14:09

We need to be able to evidence that the same person exported, re-imports it. So there will be um some documentary evidence on there that you should be able to obtain. Okay. Um there's a killer one, it's gotta be returned in the same condition. So we you could have a situation where the boat leaves the UK, right? Right. And it's outside the UK for quite a long time and goes for a major re refit in Spain and then uh tries to return to the UK under RGR. Technically, that boat will not qualify for RGR. So if you're anticipating any refits to the boat while it's outside of the UK in that sort of situation, you really need to um plan ahead.

SPEAKER_03 14:46

Okay. Is this is this defined? So I I guess if you if you're in Palmer and you get hauled out and you replace you know anodes and uh you have anti-fouling, have a polish, and then go back in, I guess that's not considered a refit.

SPEAKER_02 14:59

Yeah, I mean maintenance is fine.

SPEAKER_03 15:01

And what if you had uh something like a rig survey and if you actually had the rig pulled uh so that essentially the boat was dismantled to a point, but it's not an upgrade, it's just uh sort of routine maintenance.

SPEAKER_01 15:12

So long as you can fit it with an agio toss that it's it fill it fits within maintenance, okay, then then you you're okay. It it's it's anything that's to do with the um improvement of the yacht that goes beyond the the state of play of it. Uh listen, this is a this this this can be a grey area between what is routine maintenance and what is not. And and this is where you um documentary evidence is absolutely key here. Okay. Because you can spend quite a lot of money on uh on routine maintenance, which which could seemingly see seem like improvement works. But when you look at it in detail, it it fits within the concept of maintenance. So this is something that you you got to uh assess on a case-by-case basis, all right?

SPEAKER_03 15:53

Okay, so in this case, you guys would be if the the advice would be really to speak to yourselves and say this is our plan. You know, we are we're we're planning on doing this this winter on the boat. Is this gonna fit within the sort of confines of the exactly, exactly?

SPEAKER_01 16:09

Let let's uh you know find out exactly what uh what are you gonna do, see what the particular tax register say, uh how how they describe what what fits in within maintenance and what's likely to be classed as improvement works. And if necessary, uh you know we can we can take a few as to whether we need clearance from that, you know.

SPEAKER_03 16:27

Yeah.

SPEAKER_01 16:28

If we are quite certain that it's going to uh fall into improvement works, well what what can we do to protect the paid status so that it can return on the RGR? Yeah, so there uh there there's headroom um head there, but uh only if you uh have time to um you know plan and take the appropriate action.

SPEAKER_03 16:47

Okay. And and say you it's deemed that you have done more than what's acceptable and you try to come back into the UK RGR, will you just lose your VAT status? Well uh potentially, yes.

SPEAKER_01 16:58

Uh if you look at interpreted rules um technically, now there is a process where depending on how you um did the export to protect the VAT element status of that boat, you know, and then just declare VAT on the um improvement works. There might be scope for that, you know, so that you don't declare that on the whole vessel again. But that's where yeah, you you you you got to plan it out and see what what reliefs are available that you can exploit.

SPEAKER_03 17:24

Okay. So I'm just going slightly off piste here. Uh if you were to take a boat from the UK and you went to Turkey, for example, and she had a major refit in Turkey. Yes. And then you came back to the UK, would that be okay?

SPEAKER_01 17:36

Technically, no, it wouldn't be. If the refit was um went well beyond maintenance, no. Uh I think I think that'll be a challenge. And of course, uh one might ask, uh, how will HMRC no? Yeah. Yeah. But usually these things are uh well publicized on the on the um internet. So um yeah, it's it's it's a good one. But technically, if you look at the rules, the conditions, retained in the same condition requires just routine maintenance and repairs.

SPEAKER_02 18:04

Yeah.

SPEAKER_01 18:04

Major refrece upgrades would not be acceptable. And uh I'll just cover off the time limit. So standard rule is three years in the UK, right? But you know, for private yachts, you you can waive that. Um, but that's on application, and that will depend on the particular circumstances. In the EU, it it is three years, but subject to the particular circumstances at play, you might be able to get an extension to the three year, but you need to apply in advance for that. Okay. So, for example, a typical situation will be the weather, you know, if you you if you kind of uh return back because of the weather conditions. And again, we've had experience where we've had to um where we've assisted clients in in getting an extension. Definitely one in advance, and um pretty sure one retrospectively. Right, okay. Which which was an interesting one. So, yeah.

SPEAKER_03 18:57

Yeah, so this has got to be really made sure and fast that you've got this right, because you could be talking a significant lump of money if you get this wrong and you come back into the UK.

SPEAKER_01 19:07

100%, yeah. So um, yeah, as well as that, of course, documentary evidence is is is key here, you know. Can you evidence when you exit, you know, what documents uh have you got and returning, etc. How you how do you do that? By conduct? It it you can come back by frit, and there's you know you can still get the relief, but the whole point of IRGR is that you don't have to pay any input battle duty on returning.

SPEAKER_03 19:32

Okay, oh that's very good to know, and yeah, it's extremely important. So we'll move now on to uh how commercial operations differ from leisure use in the UK uh and temporary admission is generally not available for commercial use. Um can you talk us through these options in this case?

SPEAKER_01 19:49

Yeah, it's it's quite straightforward really. TA, you know, one of the conditions is that it prohibits business use. All right. So for commercially operated pleasure crafts, TA is not, is is it's should I say generally not available in the same way as for if you're arriving for pleasure use. Just one exception, right? Important exception, I suppose, to highlight in in terms of the the world that we we operate in. Uh and that is um yachts that are providing passenger transport, which is a really valuable uh relief actually. There is a small exception for passenger yachts, and they can come in under a specific TA relief, right? Make supplies of passenger transport in the UK without having to be formally imported. Now passenger transport can be zero rated if you um the conditions apply, or they can be uh taxable if the conditions are not met. But regardless of what the bad liability is, the tier relief can still be applied, which means that no import declaration required. Alright?

SPEAKER_03 20:54

Okay, interesting. Okay. Something you touched on briefly before, which I have to say is completely new to me, is the unfettered access relief or UAR. I understand this is something available in Northern Ireland. Yes. Uh novated under the Windsor framework. It seems very interesting and fascinating to read about in your article. Uh, could you possibly uh unpack this for us and um educate me slightly?

SPEAKER_01 21:18

I'll I'll try, but I'm wondering, it's it's it's quite com uh complicated. Uh so yeah, this is a very interesting relief, and as time goes on, uh we we we're getting more and more queries uh from Northern Ireland residents mainly on the transactions including buying and selling the boats. Okay, so essentially, unfettered access relief allows you a free pass from Northern Ireland to GB without having to go through a formal import declaration. That's objective behind it, all right? So it allows effective free movement from Northern Ireland to JB. Yeah, the issue is how do you know, because one of the conditions is that the vessel must be uh a qualifying Northern Ireland good, right? And uh how do you know your your goods qualify? So it qualifies generally broadly if the yacht is has EU VAT paid status or indeed VAT accounting status, right? And it moves from say France to Northern Ireland, then that means it's in free circulation in Northern Ireland. If you have that sort of situation, then that vessel can move from Northern Ireland to Great Britain, anywhere in Great Britain, without having to do a formal import declaration.

SPEAKER_02 22:33

Yeah?

SPEAKER_01 22:34

Right. Which is great because if you can if you can avoid a formal import customs declaration, in most cases it avoids um issues, other issues relating to um say a capital goods scheme for um marine um for for vessels where there's private use. That's a that's a different subject. I don't think um we have time to cover here. Right, okay. Um so so that's the general concept. behind it. If it if you are able to move the vessel to JB under the status, for certainly for for um and that's that's this interesting bit for private pleasure craft you can actually sell that pleasure craft in JB without incurring any VAT there won't be any VAT liability and that's been confirmed by HMRC. Right. But there's a there but there's a massive pitfall because if you do so then you lose the EU VAT pit status number one. Alright? Right. And while you can roam um UK waters without having any further VAT liability as soon as you leave the UK waters and then you're trying to come back you're gonna you're you're gonna have to pay something for VAT. So you you you lost on both counts you you you now have a boat that hasn't got EU VAP status and it hasn't got UK VAT status. So it's not great. But imagine that right if you have a UK guy that has a VAT paid vessel in the EU and he wants to um bring it back into the UK it should be possible for him if the I turn E involves passage from Northern Ireland for him to enter GB without having to pay any um import VAT which is quite a good thing.

SPEAKER_03 24:14

Yeah absolutely so from a a a a broker's point of view so say uh a family have bought a boat um in the south of France or Spain boats EU VAT paid they've done their time in the Mediterranean and they want to go cruising the UK uh they want to do Scotland so they go via Northern Ireland they come back down into the UK and they never leave the UK and decide to sell the boat in the UK. What would her VAT status be at the point of sale?

SPEAKER_01 24:42

Well there won't be any VAT due and we've got confirmation of that. So long as it came across as um with with the unfettered access um status selling the boat in GBE will not raise any VAT liability in that sort of scenario but of course as I as I mentioned it it then loses the EU VAT paid status and when the new owners take that boot out of GBE to bring it back in they would have to pay some VAT on it unless of course unless of course they can qualify for TA UK TA right okay so it's an interesting one yeah um but yeah one one that needs explaining and one that needs an expert like yourself really to guide some through I think it's uh watch the space because uh I think we'll start seeing more and more queries involving Northern Ireland and particularly how uh the rest of the EU respond to such um transactions as well we haven't we haven't really seen much uh on the other side certainly we uh we've dealt with more queries on on our side right okay because yeah as brokers you know we're dealing with with VAT questions on yachts continually and it's just something we're always handling but the reality is you know we are yacht brokers we're not experts like you we're we're amateurs when it comes to advising on VAT which is why it's great to have PKF to turn to as needed and we just see the rules in the UK and Europe are continually changing extremely complex so could you just sort of explain in a nutshell um how you guys are able to contract with yacht buyers and sellers to provide your specialist advice agreed yeah I mean um there there's two I suppose there's um two points if the um transaction uh relates wholly to um UK VAT taxes we we usually um contract directly with the owner the operator etc and we agree uh the scope of services provide and a fee yeah so we'll do that directly now right if it involves both UK and EU VAT we would still contract directly and then we'll buy any necessary service from our partners uh in the EU or rest of the world as as uh necessary but in a situation where the VAT is is predominantly EU with local VAT obligations required we would um signpost them to our recommended partner in that particular jurisdiction to uh contract with them directly we can still maintain a role in in coordinating and assisting you know but we would uh for you know i i we wouldn't be adding much value if uh everything is in that particular jurisdiction so that's generally how we um operate on contract for our services contract with our customers to provide our services okay understood well I think you know more and more people like yourselves these specialists becoming you know worth their weight in gold really because as we discussed the the potential pitfalls and and costs associated can be quite significant to say the least so thank you very much Joe really appreciate your time really appreciate your your knowledge and information uh and hopefully our clients potential clients enjoy listening to this and and can be of use to uh PK Francis Clark and vice versa thanks Tim thanks Tim and uh thanks again for inviting us on this podcast.

SPEAKER_03 27:51

Pleasure Joe have a great weekend thank you and you too take care and you bye bye