Find out the procedures you'll need to follow to zero rate VAT for the supply of a 'sailaway' boat.
This notice cancels and replaces Notices 703/2 (January 2011). Details of any changes to those notices can be found in paragraph 1.1.
1. Sailaway boats supplied for export outside the European Union (EU)
1.1 What this notice is about
This notice explains the procedures for zero rating the supply of a ‘sailaway’ boat. It includes information that was previously contained in Notice 703/3 Sailaway boat scheme which is cancelled. The notice has been changed because UK residents can no longer buy a boat using the scheme.
1.2 The scheme
It’s a way for an entitled person to buy a boat for export from the EU without paying VAT. Paragraphs 1.3 and 1.4 explain which boat purchases are eligible and who’s an entitled person.
1.3 The definition of a ‘sailaway’ boat
A ‘sailaway’ boat is defined as one which is to be:
- delivered to the buyer or their authorised skipper within the EU
- exported under its own power to a destination outside the VAT territory of the EU
1.4 Who can use the scheme
The scheme can only be used for the private purchase of a boat for private use by an overseas visitor. They must intend to export the boat under its own power to a destination outside the EU within 6 months of the date of delivery. This is normally the date the boat leaves the manufacturer or supplier.
This scheme must not be used to buy boats used for commercial purchases.
Before 1 January 2012, UK residents who intended to export the boat to a destination outside the EU could also use the scheme, but they’re no longer eligible. But UK residents may be able to buy a boat VAT-free as long as the seller arranges the direct export of the boat to a destination outside the EU. See paragraph 1.6 and Notice 703 exports and removals of goods from the United Kingdom for conditions.
1.5 Which boat purchases are not eligible under the scheme
The scheme cannot be used for:
- boats exported on a trailer or for exporting parts or accessories
- commercial supplies, commercial sales may still be zero-rated for VAT purposes but under different arrangements - see Notice 703 exports and removals of goods from the UK
- a new boat to be taken to another EU member state, see Notice 728 new means of transport
- boats whose final destination is one of the EU member states listed here:
Austria, Belgium, Bulgaria, Cyprus*, The Czech Republic, Denmark, Estonia, Finland, France including Monaco, Germany, Greece, Hungary, Republic of Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, The Netherlands, Poland, Portugal including the Azores and Madeira, Romania, The Slovak Republic, Slovenia, Spain and the Balearic Islands, Sweden, and the United Kingdom including the Isle of Man.
*The European Commission in December 2003 advised that the application of the 6th VAT Directive (Directive 77/388/EEC of 17 May 1977) shall be suspended in those areas of Cyprus in which the Government of the Republic of Cyprus does not exercise effective control. From 1 May 2004 goods to these destinations continue to be eligible for zero rating as exports.
1.6 Direct exports
The seller must not use the scheme if they arrange delivery of a boat either on a trailer or by using a skipper employed by them to a destination outside the EU.
If the boat is not to be used in the EU before it’s exported, the seller can arrange for the boat to be delivered direct to a destination outside the EU free of VAT.
1.7 Boats that are taken to other member states of the EU
Boats supplied for private use that are removed from the UK to another EU country cannot be supplied under the scheme. For details of how they can be supplied free of VAT see Notice 728 new means of transport.
1.8 Parts and accessories
Parts and accessories are not covered by the scheme. But parts and accessories may be supplied under the Retail Export Scheme. Notice 704 retail exports explains how to deal with sales made under the Retail Export Scheme.
2. Information for sellers
2.1 What to do prior to the boat being supplied
Before a boat is supplied you must:
- ensure that the buyer is entitled to use the scheme (see paragraph 1.4)
- ensure that the buyer intends to export the boat from the EU within the permitted 6 month time limit as outlined in paragraph 1.4
- give the buyer a copy of this notice and an application form VAT 436
- ensure the form VAT 436 is fully completed by you and the buyer, and Part 2 is submitted to the Personal Transport Unit (PTU) at least 2 weeks before the boat is delivered to the customer
All notifications should be serially numbered in the top right hand corner and submitted to the PTU at the following address:
HM Revenue and Customs
Personal Transport Unit
St John's Road
Telephone: 01304 664171
Fax: 01304 664179
Ensure that notifications are correct and complete before you accept them. An incorrect or incomplete notification will be returned for correction, and this may delay the delivery of the boat.
The PTU will provide any help or advice on the purchase of a sailaway boat.
2.2 What you should do at the time of sale
At the time of sale you must:
- ensure that the buyer knows that they must not dispose, or attempt to dispose of the boat in the EU by hire, pledge as security, sale, gift or any other means
- keep a separate record of the sale, and agree how any refund of the deposited VAT will be paid (see paragraph 2.6)
The the boat’s documents may only be used as security that’s required by the finance house for the purchase of the boat. The boat must not be pledged as security for a separate purchase, for example a car, flat or house.
2.3 Forms to use
You’ll need to prove that the boat has been removed from the EU before you can zero rate the sale. The uses of the forms vary according to whether a boat departs to a destination outside the EU directly from the UK or by another member state, see paragraphs 3.3 and 3.4.
The forms needed are:
Form VAT 436 Notification of VAT-free purchase of a Sailaway boat and buyer’s declaration.
Original copy 1 - copy for certification by a Customs officer
Copy 2 - Customs copy
Copy 3 - buyer’s copy
Copy 4 - seller’s copy
Form C88 Single Administrative Document - copies 1 to 3
Copy 1 - Community transit copy where applicable (seller to take a copy for their own records)
Copy 2 - for UK Customs
Copy 3 - for certification when the boat finally leaves the EU
Form C1331 Notice of intended departure - to advise departure from the UK.
2.4 What happens if the order is cancelled
If, after the notification is processed, the order for the boat is cancelled by the buyer before delivery, you should immediately notify the PTU of:
- the name of the buyer
- details of the boat
- the reference number shown on the form VAT 436
2.5 How to account for VAT
You must keep a separate record of all boats sold under the scheme. The sales invoice must clearly show that the supply of the boat was made under the Sailaway boat scheme.
If you do not obtain and hold evidence to show that the boat was exported within the 6 month time limit (see paragraph 1.4), you must account for VAT accordingly, if you’ve:
- taken a deposit of the VAT due, then it should be brought to account
- not taken a deposit you must amend your VAT records and account for VAT on the taxable proportion of the invoiced amount of consideration you have received, for a VAT rate of 20% the VAT element is calculated at 1/6
When you amend your VAT records you must make an entry equal to the tax on the supplies concerned on the ‘VAT payable’ side of your account. You include this amount in box 1 of your VAT return for the period in which the time limit expires.
2.6 Taking deposits of VAT
The boat is not eligible for zero-rated VAT status until you get form VAT 436 certified by the Customs office at the place of final departure from the EU. You should treat any sale of a boat under the scheme as liable to VAT until you’ve had the certified form VAT 436. You can ask the buyer for a deposit equal to the amount of VAT, to be returned when you get the evidence of export.
If you do not get the necessary evidence of export you’ll have to account for the VAT due, even if you did not charge it at the point of sale.
2.7 What to do when you get the certified evidence of export
When you get the Customs certified evidence of export, you should refund any deposit to the buyer by the method agreed, and account for the sale in your VAT records as explained in paragraph 2.5.
2.8 If you get evidence of export after you’ve accounted for VAT
If you later get evidence that the boat was exported from the EU within the permitted time limits, you can zero rate the supply and refund any deposit and adjust your VAT account for the period in which you got the evidence. You should treat the transaction as a credit in your VAT records. See Notice 700 the VAT Guide.
2.9 Using the scheme for supplies destined for the Channel Islands
The Channel Islands are outside the EU VAT area and so qualify as a final destination for boats supplied VAT-free for export.
EU residents who register VAT-free boats in the Channel Islands cannot claim VAT-free temporary importation of such boats into an EU member state. VAT is payable on these importations.
But subject to their meeting the conditions for temporary importation, private persons resident in the Channel Islands may be entitled to import their own boats for their own personal use for up to 18 months, without payment of import VAT.
3. Information for buyers
3.1 How to use the scheme
Before buying the boat you should make sure that the seller operates the scheme. The seller will check that you’re entitled to use the scheme and ask you to complete form VAT 436.
3.2 Using the boat before it is exported
You can use the boat before it’s exported but you must not:
- hire the boat
- give it away
- offer it for sale
- use it as security, except as part of any financial arrangement for the purchase of the boat
- dispose of it in any other way while in the EU
If the boat is re-imported or returns to the EU at any time, you must inform the nearest Customs office of its arrival.
3.3 What to do if you’re leaving the UK directly for a destination outside the EU
- ensure that the boat is exported within 6 months of the date of delivery (see paragraph 1.4)
- complete form C1331 Notice of intended departure
- make the boat available for inspection by Customs at exportation and where possible this should be arranged in advance with the Customs at the port of exportation (contact details can be found in Notice 8 sailing your pleasure craft to and from the United Kingdom)
- take the completed form VAT 436 and C1331 to the Customs office nearest the place of departure. Customs will retain the form C1331 and sign and stamp form VAT 436 to show that the boat has been declared for exportation, the certified form will be returned to you
- return the certified form VAT 436 to the seller, if they’ve given you a stamped addressed envelope, Customs may agree to return the form for you
3.4 What to do if you’re calling into another member state before finally exporting the boat from the EU
- ensure that the boat is exported within 6 months of the date of delivery (see paragraph 1.4)
- take the completed forms C88 (copies 2 and 3) and VAT 436 to the UK Customs office nearest the place of departure from the UK, Customs will keep copy 2 of the form C88 and return copy 3, together with form VAT 436, to you
- take copy 3 of the form C88 and the form VAT 436 to the Customs office at the place of final departure from the EU for certification
- return the certified form C88 and form VAT 436 to the seller
The seller should ensure that you understand that they cannot zero rate the supply of the boat and make the refund of VAT until they have the Customs certified documents.
3.5 How to get the deposit for VAT back
The seller will refund any deposit of VAT by the method that they have agreed with you. They will be able to do this as soon as they have received the certified forms VAT 436 and C88.
3.6 What to do if you do not get the deposit back
If you do not get the refund within a reasonable period of time, you should contact the seller. HMRC is not responsible for refunding the deposit for VAT.
3.7 If you want to re-import a VAT-free boat into the EU
If a boat that was supplied tax free at purchase is brought back to the EU it must be declared to Customs in the member state of importation. The seller should ensure that you are fully aware of the need to make an import declaration. VAT will be payable unless some other relief is available.
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