What drives sellers to list boats privately? Is it just saving commission, or is it more a question of whether the boat can be legally sold. We discuss why you should be careful when buying privately....
Most European brokers insist on three key ‘proofs’ when listing a recreation craft:
- Proof of ownership
- Proof of VAT paid status
- Proof of RCD Compliance (CE Marking)
Sellers without these ‘proofs’ often look to other online sales portals where a private advert can be placed, no questions asked. Of these, the most common are:
....as well as the private ads sections of yachting magazines and club notice boards etc.
We’ll look at the three ‘proofs’ in detail later, but the key question any buyer should ask is “Why is the boat being sold privately?”
Now, it could be that the seller believes the market is so strong that using a broker to market the boat is unnecessary. If so, the seller will save anything between 6% and 12% (inc VAT) in commission which is a worthy saving. But, in many cases the reason is simply that they don’t have the required ‘Proofs’, so beware.
And remember, as a private sale 'Caveat Emptor' (Let the buyer beware) applies. Once you've paid your money there's no going back.
Let’s consider those proofs…
Proof of ownership
In the UK there are two types of registration, Part 1 and Part 3 (SSR). Part 1 is full registration and is a legal requirement for larger ships, but can also optionally be applied to smaller craft. Part 1 represents proof of ownership. Part 3 (SSR) is the Small Ships Register, which is easy and quick to apply for online. Part 3 does not prove ownership at all, in fact one could say that all it does is prove you know of a UK address and having submitted this, claim the right to fly the Red Ensign.
For boats without Part 1 registration, the next best thing is a proper Bill of Sale (BoS), preferably one specific to the transfer of shares in a marine craft. There are standard BoS templates, used by brokers. These will list the seller and the buyer (new owner) but does not typically contain any details of price.
If the Boat was previously sold though a brokerage there will probably be a sales agreement, which in addition to naming the seller and buyer will include details of the price, the deposit and the conditions attached to the agreement to purchase (eg subject to survey, sea trial etc). This may also be accompanied by a Sales Receipt from the Brokerage which should identify the craft (by HIN) and how much was paid by the buyer (new owner).
I have seen some hand written receipts, but these should be checked.
Proof of VAT
All pleasure craft built before 1985 and in EEA waters on 31st December 1992 are treated as VAT paid. It is in theory now possible to obtain a special certificate of VAT exemption for vessels that meet these criteria, but this would require the vessel to be brought into EU waters, and for suitable evidence to be laid before the Customs authorities as to the date of build and its location on 31/12/1992.
For all other pleasure craft VAT must have been paid, either when first sold within the EEA or at the point and location of import from outside the EEA. Bear in mind that craft sold initially for commercial use (eg charter boats) may not have paid VAT, which would become due once resold into private use.
For most imported boats VAT will have been processed by the shipping agent as part of the customs clearance and will be evidenced on the shipping receipt. There is no ‘VAT Certificate’ as such.
If the proof doesn’t exist then VAT will be due, unless the boat is being sold for commercial use.
If you don’t have proof you can pay VAT in the EEA country where the boat is located. The boat has to be in the territorial waters of the Country at the point of payment, so for example you can’t pay VAT in the UK on a boat currently moored in Spain. To do so you’d have to take the boat back to the UK first.
VAT is due on the current market value. When a boat is bought in the US and imported to Europe the market value is easy to assess, based on the purchase price. Where a boat has been in Europe for some time and is perhaps not actually being sold, then assessing value is more complex. VAT authorities have their own guides but it is really the responsibility of the owner to put forward a reasonable value. Reasonable should be based on the selling (not listing) prices of similar craft, information which is available to brokers.
VAT rates vary by EEA state but are currently 18-25%. What is more interesting is the value to which the rate is applied and some countries (eg Spain) may agree a significantly lower value. There are specialist VAT consultants who can act on the owners behalf, but bear in mind, once the process starts the place where the VAT will be paid cannot be changed.
Low VAT schemes do exist (eg Malta) but these are really only viable for larger craft with significant value. It is also theoretically possible for craft registered in Gibraltar (UK registry) to be classified as commercial craft under the SVC (small craft in commercial use) scheme which not only exempts the craft from purchase VAT but also removed the need for such craft to be VAT paid, so long as they don’t generate any income (which would be subject to VAT) and stay within the SVC scheme. This does require the craft to be MCA coded and for the SVC certificate to be renewed each year. Owners do not have to be resident in Gibraltar and neither do the craft have to be based there.
RCD compliance has two routes, certification and exemption. Some craft can claim an exemption based on one of a small number of reasons. The most common is where there is evidence that the craft was in use in EEA waters prior to the introduction of the RCD on 16/6/98. Note that this includes the dependences of EEA states located in the Caribbean. So for example we provided an exemption certificate for an 1990 Morgan 50 sailing yacht which had been operated by the Moorings Charter company up to 1995 in the waters around the British Virgin Islands (BVI). Other possible exemptions are some craft types eg canoes and any craft whose design dates back to before 1950 (even if built later, but using the same materials). These exemptions generally cover engines as well (so long as these pre-date the RCD).
If not exempt then it must comply. Proof of compliance has at least three mandatory elements:
- CE Plate (by helm)
- Owners Manual
- Declaration of Conformity
For craft imported after 1/1/06 (PCA), the craft will also have been allocated a new HIN number (unique hull number located to starboard on the transom).
The owners manual must include those details and warnings required by the RCD, not just the generic statements often found in non-EEA manufacturers.
The CE Plate must include (for power craft):
- Boat Manufacturer and model
- Importers name
- New HIN Number
- Maximum crew limit (number of persons)
- Maximum crew weight (persons plus baggage)
- A CE logo
For boats inspected after 1/1/06 (PCA), the plate should also have the words ‘Post Construction Assessment’ and the identifying number of the Notified Body (eg 1521).
In addition, any non-conformities identified as part of the PCA process must have been addressed and rectified (eg manual bilge pump).
If you want to know more or want to check whether your craft is legal then please contact Gablemarine for a free consultation.