INS AND OUTS OF THE ‘QUALIFYING SHIP’ VAT
HM REVENUE & CUSTOMS had to change its rules on which boats could be zero-rated for VAT following a court case in 2008. Lt Cmdr Colin Stone took a case concerning his Dutch barge to the High Court and won. The result is a fairly complicated set of regulations.
A ‘Qualifying Ship’, as it’s called, has to be no less than 15 gross tonnes, and is ‘neither designed nor adapted for use for recreation or pleasure’. The gross tonnage doesn’t refer to the weight of the boat itself, but its theoretical carrying capacity, calculated by taking length, breadth and depth measurements and using a special formula. The depth is measured to the deck, which in most cases is the gunwales. The makers of some boats have reduced the width of the gunwales so they can no longer be walked along; this, they say, means the roof can be classed as the deck. This Sheffield Keel, though, needs no such tricks to qualify; it does so easily. In any case, though, it’s worth checking with HMRC that any boat you buy really does qualify.
Apart from the size, a boat can only be zero-rated if the owner intends to use it as a place of permanent habitation. That doesn’t mean that the owner has to live aboard immediately, but they must be able to demonstrate that they intend to live aboard at some point, and HMRC may check.
Even if a boat is zero-rated, you should still ask for a VAT invoice to be raised. It shows the VAT has been accounted for and means there won’t be a problem when it comes to a resale. In addition, it satisfies European Customs should you take the boat to explore the Continent. As with everything to do with taxes, it’s advisable to take good advice, and not leave anything to chance.