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How To Prepare Your Yacht For Brexit

With Brexit day fast approaching, yacht owners need to have contingency plans in place to cope with the potential outcomes of Brexit. Whether it’s a deal or no-deal, we recommend that yacht owners prepare for every eventuality - especially if the yacht is owned via a UK entity and/or registered under the UK flag, but moreover if you imported the yacht or paid VAT in the UK. 

How does Brexit affect VAT management of a yacht?

Without having a deal with the EU, the UK will leave the European Customs Union. The UK will no longer be part of the EU VAT system and will be therefore treated as a Third-Country jurisdiction from a VAT and Customs perspective. Since no agreement is currently in place, several considerations may be possible, including: 

  • Yachts imported into the UK might remain in free circulation or lose their status after Brexit; or after their first move to non-EU waters
  • Yachts with VAT paid under the UK VAT system might lose their VAT paid status
  • Yachts owned by UK residents can be used under Temporary Importation within the EU
  • Yachts acquired by UK residents from EU shipyards can be acquired without paying VAT
  • Yachts owned by UK companies and used for charter business in the EU might need to be re-imported after Brexit to continue their charter operation
How does Brexit affect the operation of a yacht?

In addition to the above VAT and Customs considerations, the loss of EU-status on UK flagged yachts might have consequences on the operation of the yachts. 
For example, a commercial yacht registered under a UK flag will require a Charter Licence in Croatia after Brexit as it might be treated as a non-EU flag by the Croatian Authority. 

If the UK leaves the EU without an agreement, then the Employment and Social Security Regulations for Crew members working on all yachts will also change. 

What do we know now? 

Unfortunately, there are no certainties. Advisors and tax experts vary in their interpretations of the consequences for the yachts post-Brexit. The location of the yacht on the day of Brexit may affect the Customs and VAT status of the yacht and therefore the following scenarios may be possible: 

  • Yacht based within the EU, owned and flagged in the UK  
    Such yachts in free circulation will retain its status after Brexit
  • Yacht based outside the EU
    These yachts might lose their status post-Brexit and require a new importation when they subsequently enter into the EU after Brexit
What should you be considering now?

The crucial aspects for yacht owners to consider include:

  • deciding where they plan to use the yacht (within or outside the EU); and 
  • how they plan to use the yacht (private or commercial) within the EU. 

These considerations will affect the yachting structure and determine if changes are needed post-Brexit. A thorough assessment is strongly recommended before making any decisions. 

In the event of EU-resident yacht owners planning to be based in the EU, an EU option would be most feasible; whereas a UK structure and UK flag remain a valid option for UK residents, or yachts that will be located predominately outside of the EU.   

If you have any questions regarding this article, please get in touch with our marine experts.

 

Contact Anthony Galea

 

 

Marine & Aviation

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