A discussion (on 3rd February) between representatives of the Isle of Man Yacht Forum, Isle of Man Customs & Excise and HM Revenue and Customs (HMRC) focused on the VAT treatment of yacht chartering or leasing as defined in the Revenue and Customs Brief 56/09.

The Brief 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, 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 Customs 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 can not be tolerated is sole use of a yacht by the person who is the funder or ultimate owner of the chartering entity".

Issues surrounding the application of the Brief to yacht leasing are under further review.

Further enquiries on the application or interpretation of RCB 56/09 may be made to IOM Customs & Excise Advice Centre – telephone 648115.