Following meetings between the Isle of Man Customs and Excise (IoMCE), the Isle of Man Yacht Forum (the Forum) and HM Revenue and Customs (HMRC) the Forum is pleased to announce good news for the Island’s yachting business.
The guidance on the VAT treatment of yacht chartering or leasing activity contained in Revenue & Customs Brief 56/09 (RCB 56/09) was discussed on 3rd February 2010 by representatives of the Forum, IoMCE and HMRC.
RCB 56/09 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.
An IoMCE spokesperson stated: "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 said: “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 and whereas there is much still to be done, the achievements so far at Governmental level, are worthy of significant praise.”
Isle of Man Yacht Forum
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www.isleofmanyachtforum.im