Dear Alan

This query is nix to do with Australia! Could your firm of accountants in Southampton advise me, please? If it is not your own firm's bag, could you suggest anyone, please?

The sea flows through my veins. I will get on anything with a half-decent chance of floating to France.

At the weekend, I saw a BEAUTIFUL yacht-to-be. She is a brand-new, beautifully-built, steel shell at the minute. She is worth at least £100K as she stands but her owner has run out of emotional (not financial) steam. He would take £30K in readies to get shot of her, but she has cost him £225K so far - which is true. That hull could not not have cost less to build.

The owner says that he and his wife bought a UK shelf-company which owns the boat. Via building to a particular Maritime & Coastguard Agency-administered Code of Practice this boat is somehow zero-rated for VAT, he says. He says there has not been a bean to pay by way of VAT so far, the whole build is zero-rated and he thinks future fitting-out costs plus future charter-income would be zero-rated as well. I muttered that the Revenue and Customs tend to start muttering that the thing is a hobby, not a business, but the owner does not agree.

The company has an accrued tax-loss of £225K as well, the boat is its only asset etc. The idea is to sell the shares, complete with the only asset and the loss plus the alleged VAT-position.

Alan - is this story too good to be true?

Thanks very much

Gill

Hello Gill.

This is outside my immediate sphere of knowledge, so I'm afraid I can't help on this one.

I'll contact you "off forum" with the name of a firm of accountants that might be able to help.

Best regards.

Hi Alan

Many thanks for this reply and thank you very much for your PM as well. It was only when I was driving to work this morning that the penny dropped that we were discussing two different threads on two different topics.

Right now, my Other Half is being a right stick in the mud about the gorgeous boat. He reckons she is unaffordable and an unrealistically large project unless she can be thrown at a shipyard for them to do all the work regardless of cost.

That isn't what the canny Scotsman who went to see her on Saturday thinks, I strongly suspect.

I live in hope of talking my OH round.... If I succeed, then we'll definitely get on to your man because I think the tax-story would have to stack up to make this boat a risk worth considering.

It could be that if the tax-loss can be acquired and passed on, then better marketing could easily double (or possibly more) the £30K that the current owner would be willing to take to get her off his own hands. I suspect that one needs to be the one to find the millionaire buyer, not necessarily be him oneself.

Hey ho. I live in hope....!

Thanks again

Gill

Hi Gill,
I may be able to help you a bit as I have built and now operate a coded charter boat in the UK.

Charter boats used for sightseeing, cruising, diving, angling etc. fall under the VAT heading of passenger transport providing they are licenced for 12 persons including the crew. Passenger transport is currently zero rated and any income derived from carrying passengers will be at that rate. If you provide other services such as in my case,the hire of fishing rods or the sale of bait then that income is vatable at 17.5%

The VAT on the construction and sale of a vessel is at 17.5% but if you are VAT registered you can claim this back. You will have to prove to the VAT inspectorate that you are running a business using the boat to do this.

Regarding the "coding" this is run by the Maritime and Coastguard Agency (MCA), they have passed on the licencing to other bodys such as the RYA, MECAL, YBDSA etc.These organisations appoint their own surveyors to ensure that the vessel complies with the code of practice.

My first action would be to find out from the owner which surveyor has been inspecting the boat during construction and to make sure that he is happy with the build so far. He will be the person to sign the certificate at completion, without that the boat will not be licenced.
He may be able to give you a valuation, if not I would contact a local YBDSA surveyor who is familiar with that type of craft.


If I can be of any further help please do not hesitate to contact me.

We have applied for a 405 retirement visa through Go Matilda and hope to be based in between Brisbane and Noosa.

Best wishes, Roger

Hi Roger

Thanks very much for this information. I had been unaware that "passenger transport" is zero-rated for VAT but your comments explain that bit, which is very useful.

Thanks for the stuff about Codes too. The hull has been built to Lloyds Register Special Service Craft (something like that, anyway) scantlings and has 5 watertight bulkheads which are in place. She's 72' and will be a motor-sailer when finished (if ever.) The engine beds have been installed too and the deck is partially complete. There are still massive holes to allow for the engines (2) and generators (2) to be lowered into the engine-room, after which I assume the deck and coachroof plating will be completed.

As yet though, she's a bare shell apart from as described above. She deserves to be finished off to luxury yacht standard and finish. That, unfortunately, would be £250K of anyone's money because she's an unrealistically large project for DIY if a decent standard is to be achieved. So saith my OH anyway - who might be right.

Dunno - I plan to wait for a while longer and then see how the land lies. She's out of the water at Universal on the Hamble. Apparently she has to be out of there by the end of March because there are plans to redevelop the yard.

If she hasn't been sold by then, then who knows.....?!

Thanks again for your most useful information.

Best wishes

Gill