So-called cross-border leasing schemes for yachts which enable them to be bought without paying VAT are being targeted by a special Revenue and Customs team according to a report in the Saturday Financial Times.

The practice of exploiting differences in VAT rules between European Union countries by setting up an ownership structure which on paper looks as though the yacht is being chartered or leased and is thus not liable to VAT, have been in operation for years, but now it looks as though Revenue and Customs are going to get tough on the practice.

According to the report in the FT the Royal Yachting Association has told it members that the schemes, normally applied to more expensive yachts, are ‘likely to encounter increased litigation in the future’. The RYA added that yachts which have been bought using schemes like cross-border leasing could be more difficult to sell.

The report goes on to say that the Revenue and Customs anti-avoidance team dealing solely with yachts has become increasingly irritated by the ‘extent of VAT planning around boat purchases’.

The crackdown is likely to effect yachts with purchase prices between £500,000 and £2 million. Yachts in excess of that value were, the report said, more likely to be kept in the Caribbean and Mediterranean and would not be subject to the action.

Yachts need not pay VAT if they are run as genuine commercial concerns as charter vessels and in such cases even the owners have to pay the going rate when they are aboard.

For the full story in the FT check out www.ft.com. Watch out for an update and a more detailed look into the VAT situation on yachts in an upcoming issue of Yachting World.