Re: VAT on leased assets

Keith wrote:

In message <XKKBh.1966$I46.1106@xxxxxxxxxxxxxxxxxxxxxxxxxx>, Ronald
Raygun <no.spam@xxxxxxxxxxxxxxxxxxxxx> writes
Keith wrote:

A UK company, VAT registered, purchases an asset which it then exports
and leases to an overseas company.

Having paid VAT on the original purchase -

i) can the lessor reclaim the VAT on the purchase when the asset is
exported?

ii) as the revenue is from outside the UK it is not VATable. Can the
company de-register if its total income from all sources is below the
relevant threshold.

(Ronald, this is one for you - the asset is a new Bavaria 37 and the
lessor is based in Thailand)

I'm not really into the finer points of VAT, but here are some thoughts.

Surely VAT is reclaimed upon purchase irrespective of whether the
asset is subsequently exported.

Are there not special criteria with regard to asset purchases? Is it not
like, for example, motor vehicles - the VAT cannot be reclaimed in
certain circumstances?

Doesn't the definition of "export" imply transfer to foreign ownership?

Not by my understanding. Goods can remain in domestic ownership but can
be exported.

Isn't that only if you do it as an individual? As an individual if you
change your residence anything you take with you is thereby exported, but
isn't it that case with a UK company that it is always remains notionally
"UK resident"?

How do Sunsail manage it?

Perhaps by arranging for the boats to be owned by individuals and only
managing them.

How do the oil excavation platform operators work it?

Perhaps because oil platforms are "offshore".

Why is it that ex-flotilla boats for sale in Turkey are 'VAT unpaid'?

Because Turkey is outside the EU.

If it does, it strikes me that a UK company, if leasing
it to a foreign company, is not parting with ownership and so
the yacht is not actually being exported as such, merely based
abroad. It remains under UK ownership and continues to fly the
red duster.

Which is important. My question centres on this - if goods are exported
for leasing can the VAT on purchase be recovered?

I think the "for leasing" is irrelevant, and they're either exported
or they're not exported.

If it does not, and you therefore would be exporting, why bother
with a VAT registered company at all? Get the dealer to magic
away the VAT for you, and export it personally, or use a non VAT
registered company to own it if there is good reason to use a
company.

The dealer cannot 'magic' away the VAT without declaring it an export.
Which would invoke prohibitive rates of import duty into Thailand upon
its 'import'.

I think you've hit an insurmountable problem. You can't export from
one place without importing it elsewhere. Otherwise it'd be too good
to be true. Like getting married without having to put up with a wife.

For the class of goods we're discussing the 'country of registration' is
crucial. Think flags.

So what you want is to operate a Red Ensign vessel in Thailand without
importing it into Thailand. Presumably to charter. Does Thailand
allow that? Many countries don't. Not even the EU. At least not
long term.

If there is good reason to use a company, there is probably good
reason to use a company for this purpose only, and it's not a good
idea to use a company which really specialises in something else.

Eh? The 'good reason' is to recover the VAT on the purchase when the
goods are shipped to Thailand under a leasing agreement. It also avoids
the import duties and tariffs imposed in Thailand.

A UK company, registered for VAT, buys a boat. Commissions it in the UK,
then ships it as deck cargo, under a long term leasing agreement, to a
company in Thailand. Can the UK company legitimately reclaim 100% of the
VAT paid on purchase/ commissioning?

On a 94 grand boat there's 14 grand VAT, so it's not peanuts we're
talking about.

Have you thought about exporting the boat to and registering it in
somewhere like Jersey? That's Red Ensign but outside the EU.

.