Member Article

On 14 December 2022, following a campaign by the Royal Yachting Association, the UK Government confirmed that it would not be implementing changes to HMRC policy to enable UK residents that purchased (EU) VAT paid UK vessels located in the EU prior to the end of the Brexit transition period (31 December 2020) to bring these vessels back into the UK without incurring a second (UK) VAT charge.

Throughout the Brexit transition period, the UK Government maintained that the UK tax policy in relation to UK vessels was that they would not lose their status as VAT paid despite being based outside UK territorial waters - provided the sale or transfer of ownership of the vessel was made in compliance with applicable EU VAT legislation.

In these circumstances, where UK residents subsequently sought to rebase these vessels to the UK, the government had indicated that they could claim Returned Goods Relief (RGR), therefore avoiding a double VAT charge once the vessel returned to UK waters.

However, some two weeks before the Brexit transitional period ended, HMRC reversed this position and confirmed that UK owned vessels, upon which EU VAT had been paid, being imported into the UK after the Brexit transition period concluded would not benefit from RGR. For many yacht owners, rebasing their vessels in the UK before this narrow window shut was challenging.

The UK Government’s decision to not implement RGR in respect of these vessels does now mean that UK residents wishing to rebase their EU VAT paid vessels in the UK could face significant tax liability for doing so.