Friday, February 12, 2010
The Isle of Man Yacht Forum has announced that following tripartite meetings with the Isle of Man Customs and Excise (IoMCE) and the UK's HM Revenue and Customs (HMRC), there has been changes in the VAT treatment of yacht chartering or leasing activity that will be beneficial to the island’s yachting industry.
The talks on February 3 by representatives of the Forum, the IoMCE and HMRC focused around Revenue & Customs Brief 56/09, which sets out guidance on possible indicators of abusive practice. HMRC clarified that provided clear evidence exists of earnestly pursued chartering to third parties, which meets the business test and the criteria for economic activity (described within section 2 of the guidance), then there is a legitimate right to recover input tax on the business asset(s), subject to the usual rules for input tax recovery. Therefore, provided those conditions are met, no uncertainty should be created if a yacht is also used by the person who is the funder or ultimate owner of the chartering entity.
A spokesman for the Isle of Man Customs and Excise, commented: "The message to the industry is simple; examine the third party chartering activity. If this stands up as an economic activity earnestly pursued and can be so evidenced then Customs will not seek to apply the abuse principle. What cannot be tolerated is sole use of a yacht by the person who is the funder or ultimate owner of the chartering entity".
Speaking on behalf of the Forum, Chairman, Robert Tobin added: “As a result of these recent meetings much needed clarity has been agreed and provided on HMRC Brief 56/09. This is indeed welcome news from IoMCE and provides certainty for those involved in the business of owning and chartering commercially managed yachts.”
“The excellent cooperation and support of HMRC and IoMCE is further proof of the value of conducting chartering businesses in a well regulated, responsible and progressive business environment such as the Isle of Man. The meetings provided an ideal opportunity to illustrate the positive economic benefit to the UK the yachting industry provides and garner the recognition it deserves.”
“There is a further commitment from all parties to continue this dialogue about yacht leasing structures. There is much still to be done, but the achievements so far at governmental level, are worthy of significant praise.”