New VAT legislation is good news for boat owners

The UK government has confirmed that from 1 January 2022, recreational boat owners will not be required to pay a second amount of UK VAT if their vessels have been outside the UK for more than three years.

Boat owners returning their vessels to the UK can claim relief from import VAT under returned goods relief (RGR) if they meet all the conditions for the relief. One of these conditions is that the goods or effects must normally be re-imported into the UK within three years of the original date of export. 

The changes that the government is introducing are in response to concerns set out by the RYA and British Marine over the past two years, ensuring that legislation and government guidance is aligned with previous practical application of RGR rules by making it clear that:

• The normal three-year time limit will be waived for personal effects which are being returned to the UK for the personal use of a UK resident person, without needing to prove that the effects could not be returned within the normal time limit due to exceptional circumstances
• That a boat is treated as ‘personal effects’ for the purposes of this waiver

Incorrect advice was provided by HMRC on VAT relief in April 2019 and again on 3 November 2020, which was only corrected on 17 December 2020. This has resulted in boat owners having insufficient warning that they would be liable for VAT on import from 1 January 2021 if they had never owned their boats in the UK.

RYA and British Marine had campaigned that the 1-year period of grace originally effective from 1 January 2021, in respect of the three-year condition for RGR, was not sufficient, as many factors affect the repatriation of vessels, including travel restrictions, the Schengen area immigration restrictions, insurance restrictions and the length of the sailing season.

Mel Hide, RYA director of external affairs, says: “Confirmation of the waiver that the government is introducing to RGR is outstanding news for UK recreational boater owners and we welcome it as a pragmatic outcome in response to the considerable amount of time and effort that the RYA has put in to secure this result.”

Guidance on RGR will be updated from January once the legislation has been introduced.