IoM Closes Yacht VAT Loophole

by Amanda Banks, Tax-News.com, London

29 April 2010

The Isle of Man Customs and Excise, in cooperation with the UK tax authority, HM Revenue and Customs, has produced final guidance which relates to the value-added tax (VAT) treatment of IOM-based yacht leasing and chartering structures that under recent case law are deemed to be abusive. Provisions in the guidance note apply after September 14, 2009, when the former guidance was retracted.

According to the practice note, the aim of the revised guidance is to provide clear rules with regard to the VAT treatment of unacceptable (abusive) yacht leasing and chartering structures.

In particular Customs and Excise is seeking to prevent non-compliance whereby purchasers of yachts could avoid paying VAT on the purchase by leasing the yacht to a connected entity and then using it for personal use.

According to the practice note, the new VAT rules will apply retrospectively, but not in cases prior to the removal of the practice note on September 14, 2009; VAT rules prescribed in the new guidance note will apply thereafter.

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