Brexit & Yachts - Frequently Asked Questions

Introduction

It is the purpose of this guide to answer some of our most frequently asked questions concerning yachts and Brexit following the end of the Brexit Transition Period at 11pm on the 31st December, 2020.

Readers should be aware that the contents of this guide should not be relied upon as any kind of tax advice or legal opinion.

1. I am an EU citizen - will I still qualify for a UK flag registration following the end of the Transition Period?

The UK flag is a hugely popular flag for yachts sailing within the EU. The UK Register of Ships provides an excellent operating platform for both private and commercial yachts. The UK Register of Ships has proved particularly attractive for EU citizens and residents..

As part of a series of UK legislative changes precipitated by Brexit the UK Government published a statutory instrument titled ‘The Merchant Shipping (Miscellaneous Provisions) (Amendments Etc.) (Eu Exit) Regulations 2018’.

The instrument confirms that the same persons (both individuals and legal entities) who currently qualify for vessel registration in the UK will be able to do so after the UK leaves the EU.

This means that there is no need or requirement for any yacht owner currently holding a UK registration for their vessel to change their registration on eligibility grounds.

2. If my UK registered  yacht is EU VAT paid in the EU and lying within the remaining 27 EU countries at the time the transition ends will I lose my EU VAT paid status?

The VAT status of a yacht is not directly determined by its country of registration. A yacht registered in any third country can sail under free circulation in the EU if VAT and any applicable EU import duty has been paid or accounted for in the EU, (i.e. the yacht is considered to hold Union good status). 

An EU VAT paid yacht holding a UK flag lying in the remaining 27 EU countries at the end of the transition period should not therefore lose its EU VAT paid status which is a position confirmed by the EU in their guide titled “BREXIT: END OF TRANSITION PERIOD FAQs ON TAX AND CUSTOMS” where they state the following in respect of any yacht holding Union good status:

“If, on 1 January 2021, your boat is located in an EU port or sails in EU territorial waters, it will keep its Union status.”

3. If my UK registered yacht is lying in the UK when the transition period ends will I have to pay EU VAT if I take the vessel into the EU?

The EU in their guide titled “BREXIT: END OF TRANSITION PERIOD FAQs ON TAX AND CUSTOMS” states the following:

“From 1 January 2021, Union goods in the customs territory of the UK will lose their Union status and will become UK goods…………….if at that time your 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. This means that it will be treated as non-Union goods and will be subject to the same customs controls as boats coming from a third country. 

If your boat is brought back to the EU and fulfils the conditions to be considered as a returned goods, then it can be declared to customs as such. Otherwise, it can be declared for temporary admission as a non-Union goods. In both cases, the declaration can be done by the sole act of crossing the frontier.”

4. After the end of the transition period will I need to pay UK VAT on my yacht if I visit the UK?

In theory UK VAT is payable upon arrival in the UK unless the vessel qualifies for operation under the UK rules for Temporary Admission or if the vessel qualifies for a customs relief such as Return Goods Relief, Inward Processing Relief or Transfer of Residence Relief.

5. I am a UK resident looking to purchase a new yacht after the end of the transition period. Will I need to pay EU VAT if I sail exclusively within the remaining 27 EU countries?

Following the end of the transition period it is expected that a UK resident will have the ability to visit the waters of the remaining 27 EU countries without paying EU VAT on their vessels under the provisional of existing Temporary Admission rules.

This is confirmed by the EU in their guide titled “BREXIT: END OF TRANSITION PERIOD FAQs ON TAX AND CUSTOMS” which states the following:

“47. I own a boat which will be kept in the UK. Will I be able to bring it to EU waters from the UK for competitions or holidays, without completing customs formalities, or incurring VAT or other charges? 

A boat or plane for private use can be temporarily brought into the EU from a third country without paying VAT or other charges, through a temporary admission procedure. 

The boat or aircraft must be registered outside the EU and owned by a person established outside the EU, to benefit from this procedure with total relief from import duty. They must leave the EU again within set time limits: 6 months for an aircraft and 18 months for a boat/sea vessel.”