Eamon McNicholas Tax Barrister, Accountant

Westwood Chambers

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01702 416 511

07803 92 9997

The Kei

Whether or not VAT is payable on a boat, or ship, can be a problematic area. The basic rule under VAT Act 1994 schedule 8 group 8 is that a boat or ship is zero-rated for VAT. But if it is under 15 tonnes or has been built, or adapted, for recreation or pleasure then it is standard rated.

Problems arise, however, with the growing number of boats built or adapted to be lived on, with a Dutch barge being a popular design. HMRC used sometimes wrongly to insist a Dutch barge, English narrow boat or similar was a pleasure boat and so taxable.

Eamon McNicholas, Tax Barrister, successfully took a test case for Lt Cmdr Colin Stone who had a Dutch barge specifically designed and built to be lived on. After a great taxpayer win at the Tax Tribunal the response of HMRC was to take it on appeal to the High Court where they lost again. A link to the case HM Revenue & Customs v Lt Cmdr Colin Stone "The Kei" [2008] EWHC 1249 (Ch), 05/June/08can be found at the Bailii.org case reporting website.

As a result of Eamon's win HMRC changed their policy and in July 2009 they issued "Revenue & Customs Brief 38/09 - VAT - 'Dutch barges' and similar vessels designed for and used as permanent residential accommodation by owners".

HMRC accept as zero-rate Dutch barges and similar boats designed and supplied for use as a permanent residence. See HMRC’s concession here.

The court victory and HMRC's concession vindicates Eamon's approach that in law a boat in fact designed or adapted for living is properly zero-rated. But of course a lot depends on the careful examination of the facts in the individual case. Just adding an extra berth to a weekend pleasure cruiser does not make it VAT free and HMRC's Brief 38/09 shows they will not give in easily. But with expert help from Eamon, either at an early stage of the negotiations with HMRC the taxpayer or boatyard has a much better chance of not wrongly having to pay VAT that is not lawfully due.

Eamon also often advises on supplies of boats in the recent past which had VAT added but which ought not have and the chances of reclaiming the VAT.

VAT and Boats