HMRC clamps down on yacht chartering businesses
For many years, HMRC have been unhappy that certain yacht owners have been able to reclaim VAT on the purchase of a yacht and associated running costs, by setting up a yacht chartering business. HMRC’s view has been that in some cases, (principally where there is a significant level of private use by the owner and/or their family), this situation has given rise to a tax advantage.
HMRC recently issued a business brief outlining their new approach to yacht chartering/leasing businesses. This approach appears to be much tougher than the position taken until now and adopts the principles of a recent 'abuse' case (Halifax and Part Service Srl).
The new rules focus on the economic substance of the business and if a tax advantage is the aim of the arrangement, then HMRC will take appropriate action.
It appears that this new approach will apply to both existing businesses and to new applications for VAT registration.
Jane Stacey is a VATadviser and a Senior Manager at Mercer & Hole. The views given in this blog are personal to the author.
Date: 30th September, 2009
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