Does boat in Cyprus cause a VAT problem for our UK company?
Q. I own a boat that is permanently moored in Cyprus. It is mainly used for our private holidays, but we sometimes hire it out to friends, relatives and other parties to help pay for its maintenance costs. The income has always been recorded in an American company but we have decided to transfer it to the ownership of our UK company which is registered for VAT. Do we have a potential VAT problem? The boat is worth £500,000.
A. There is no issue here with any supplies of goods with the transfer of ownership because the boat never arrives into the UK, i.e. the transfer is outside the scope of UK VAT. With regard to the charter fees, the place of supply for VAT purposes would be Cyprus and not the UK, i.e. where the hirings take place, so you need to check if you will need to register for VAT in Cyprus, which is part of the EU and therefore has a full VAT system in place.
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