Update to HMRC Brexit Rules

HMRC has made a further revision to the VAT 'Returned Good Relief' (RGR) rules that now apply to yachts following the end of the Brexit transition period. The headline news is that the "grace period" allowed for the return of yachts from the EU to the UK without VAT being due has been extended from 31 December 2021 to 30 June 2022.

The CA received the following statement from the Stakeholder Engagement Team of HM Revenue and Customs:

The additional period extends the existing one-year grace period agreed last year to 18 months, allowing goods located in the EU to return to the UK by 30 June 2022 under RGR rules, regardless of when they left the UK.

This change is a step forward and will provide some relief for members who were intending to bring their boats back to the UK this year, but it still does not address the fundamental issues about which the CA is campaigning. Moreover, the revised legislation is unclear on certain points and potentially results in some strange, likely unintended, scenarios. These are summarised as:

  • The 18-month period for return to the UK still does not address the needs of yacht owners with yachts in the Eastern Mediterranean. Covid and the 90/180 day visa restrictions mean that coming back to the UK before 1 July 2022 still represents a formidable challenge.
  • The changes do nothing to address the plight of yacht owners who purchased their yachts in the EU and have not previously kept their boat in the UK. These yacht owners will still be required to pay UK VAT within 30 days if they bring their yachts into the UK.
  • Somewhat absurdly, the new HMRC rules clarify that relief from UK VAT is available for yachts purchased in the EU that were exported from the EU before 31 December 2020 and which are returned to the UK before 30 June 2022. This means that yachts purchased in the EU that left the EU on a cruise outside the EU (e.g. to the Caribbean) before 31 December 2020 can now be returned to the UK before 30 June 2022 without being subject to UK VAT.
  • The updated HMRC wording on the extended 18-month grace period states that goods in the EU at 31 December “must return” by 30 June 2022. As currently drafted, this seems to have the effect of overriding the usual 3 year RGR rule, which means that all yachts in the EU would have until 30 June 2022 to return without becoming liable for VAT, regardless of when they left the UK. (The previous HMRC version referred to goods “that are returned” with the one-year grace period extension, which indicated that the normal 3 year RGR period would not be impacted).

The Cruising Association will continue to press HMRC to grant a three year transitional period expiring on 31 December 2023 for all leisure vessels to claim RGR on their return to the UK without paying VAT, irrespective of whether they were located in the UK prior to the end of the transitional period.

In addition, we are asking that "exceptional circumstances" should be expressly applied to leisure vessels however long they have been outside the UK.

The CA is currently seeking legal advice about HMRC's unreasonable approach and is endeavouring to enlist the help of influential politicians to assist in the campaign to change HMRC’s approach. We are also requesting information under the Freedom of Information Act on HMRC’s discussions in 2020 on these issues.

As soon as there are further developments on these important concerns updates will be issued to CA members.

31 March 2021


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