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HMRC internal manual

VAT Transport

HM Revenue & Customs
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Ships designed or adapted for recreation or pleasure: residential boats

Boats for Residential Use

It is very important not to confuse the term houseboat in its legal sense with a generic boat that is lived on but has a means of propulsion. The term ‘residential boat‘ should be used for VAT purposes.

This has been a particularly contentious area largely surrounding ‘Dutch Barges‘ and to an extent ‘broad-beam‘ canal boats that are purchased by owners with the intention of permanently living aboard (‘livaboards‘). These vessels can be new build, bespoke or conversions from original cargo-carrying barges. In most cases they have working engines so are not houseboats for VAT purposes. It is important to remember that a ‘residential‘ boat is accepted as a qualifying ship on the basis that it is not a ship designed for recreation or pleasure: in other words, proving that it is a qualifying ship involves proving a negative.

When it has been established that a residential vessel is a qualifying ship, any liability issues that arise are decided on the same basis as any other qualifying ship (such as a tanker or tug boat), and not on the basis that it is a residence.


New build boats of this type have been considered in two Tribunals John Grieve VTD 20149 and Colin Stone VTD 20229, which came to opposing conclusions. The Stone decision was appealed to the High Court [2008] EWHC 1249 (Ch) where it was found that this barge was not designed for recreation or pleasure.

Revenue and Customs Brief 38/09 (VTRANS110560) gives details of HMRC’s policy in light of the judgment. This brief also withdraws the relevant part of Customs and Excise Brief 35/05 which followed an earlier VAT Tribunal decision Mrs D.G. Everett/London Tideway Harbour Company (LON 92/1911A, 1912A) concerning working barges converted to residential use.

DIY claims for building or conversing of boats

Queries have arisen from individuals who are arranging the conversion of commercial barges to permanent residential use, purchasing materials and doing some or all of the work themselves, and who consider that they should not be taxed because they are creating living accommodation. While works of conversion, and supplies of parts and equipment, provided by VAT registered suppliers, can qualify for zero-rating under Group 8 items 1 and 2A where the relevant conditions are met and the vessel is a qualifying ship before and after the work (see VTRANS120000), there is no general relief for materials similar to the DIY relief for houses. Where private individuals are converting such barges and are charged VAT they cannot therefore reclaim it.