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Statement regarding the free movement of pleasure craft in the event of a 'No-Deal' Brexit
Members closely following Brexit negotiations will know that as of this morning (17 October 2019) the UK Government and the European Union have agreed a new Brexit deal. This deal will, of course, still need to be ratified by UK Parliament and the EU27.
With it remaining uncertain if this deal will be ratified, it is important that British Marine continue to be provided members with the latest information which could affect their business whatever happens over the next few days.
As a result, the RYA and British Marine, the two largest marine sector member organisations in the UK representing recreational boaters and the leisure, superyacht and small commercial marine industry respectively, have been working closely together to seek and obtain greater clarification as regards the free movement of pleasure craft in the event of a ‘no-deal’ Brexit.
Whilst by no means comprehensive or necessarily definitive, HMRC and the European Commission have provided us with a better understanding of how they see the rules applying in a ‘no-deal’ Brexit world.
The objective of the RYA and British Marine is to provide our respective members with a consistent and clear message and we have summarised our latest views and understanding of how the rules and policies will apply.
Until the UK voted to leave the EU, boat owners and businesses often referred to boats being tax paid or as having VAT Paid Status; whilst there has generally been common understanding as to what this meant (although not always correctly interpreted or applied) these terms are not used within EU legislation or official guidance.
This is why we refer to a boat as having Union Status (Customs Status of Union Goods), which allows free movement within the European Union. In the event of a ‘no-deal’ Brexit, Union status will relate to goods which have free movement within the remaining 27 EU Member States (the EU27). We have been using the term UK Status to classify goods which are expected, after a ‘no-deal’ Brexit, to have the equivalent status but just for the UK.
VAT payment on a boat is not necessarily a one-off event and, surprisingly as it may seem, if a boat leaves the EU, there is a risk of VAT becoming payable again when it returns to the EU. This is because an import into the EU triggers a ‘chargeable event’ for VAT and a customs debt for goods which are to be released for free circulation. However, EU rules allow goods (boats) to re-enter the EU without payment of VAT and import duty provided the boat:
Had Union status when it was taken out of the EU;
Was exported from the EU by the same person who is now importing it;
Is in the same condition as when it was exported; and
Returns within three years of export
This is commonly known as Returned Goods Relief (RGR)
‘No-Deal’ Brexit – What This Means for the UK
Boats with Union Status and Lying in the UK at the time of a ‘no-deal’ Brexit
EU guidance states that if a boat is in the UK or within UK territorial waters at the point in time when the UK leaves the EU and there is ‘no-deal’, the boat will assume UK Status but will lose its Union Status.
Can A Boat Without Union Status Then Be Taken To The EU27?
In the event of a ‘no-deal’ Brexit a UK boat which does not have Union Status will be able to travel into and around the EU27 under Temporary Admission (TA) arrangements, subject to conditions. Boats that do not have Union Status which are owned and used by people from outside the EU (or more accurately who are not habitually resident in the EU) may be granted TA for a continuous period of up to 18 months within the EU27, whereupon they are required to leave the EU – although re-entry under TA can be made almost immediately.
However, if the boat is to remain within the EU27 beyond the continuous 18 month period, possibly for sale or change in residency, or if the boat is to be used for commercial purposes the boat will require importation and payment of VAT (and where necessary, Duty) at the relevant rate. This will apply even if EU VAT has been paid previously, if the boat is not eligible for RGR e.g. the boat was in the UK at the time of a ‘no-deal’ Brexit.
Will A UK Boat Lying In The EU27 BE Subject To VAT (and Duty) When returning To The UK?
UK HMRC have advised that plans have been made to replicate EU RGR and into UK domestic law. This will allow UK residents returning to the UK with their boats after a ‘no-deal’ Brexit relief from VAT (and Duty), subject to conditions. We understand that it is HMRC’s intention to use the rules above (substituting UK for EU). HMRC have also stated that they allow the boat UK Status on its return to the EU provided the owner can demonstrate:
- The boat was acquired pre-Brexit; and
- Evidence of VAT paid either in the UK or the EU27 pre-Brexit
The intention is for non-UK owners to be entitled to use their boats within the UK and UK territorial waters under TA rules with the same conditions that apply within the EU27, but if the vessel is to be used commercially or imported into the UK (e.g. for sale) UK VAT (and Duty) may become due, irrespective of any Union Status the boat may have had.
What Happens To Boats That Are Outside Both The UK AND The EU27 At The Time Of A ‘No-Deal’ Brexit?
The European Commission have confirmed that in such circumstances where the boat is lying outside both the EU27 AND the UK at the time the UK leaves the EU, then on returning to the EU27 after Brexit there will be an eligibility for RGR and consequential free movement within the EU27, provided the RGR conditions above are met.
This differs from the position where boats are within the UK at the time the UK leaves the EU (see above) as in these circumstance the boat will not have technically left (been exported from) the EU, rather the UK left the EU.
Whilst uncertainty remains, we will continue our combined lobbying of both the UK and the EU for greater clarity, understanding and the adopting of common sense approaches. Our respective members will be updated of progress as and when it develops.