See Also "VAT Again"

We now have a lot of expertise in the area of VAT on River Works licences. Contact David for details.

The VAT problem for houseboats began in 2009 when the PLA unilaterally decided to waive the normal VAT free status of their land rentals (basically a River Works Licence is a land rental). They did this without consulting the houseboat owners who would end up paying it. Why did they do it? Basically it allows them to recover some VAT on their paperclips and admin costs (whilst putting up our charges by 20%!). See this relevant article on farmland and VAT:

"Farmers will be used to renting fields and farm buildings without VAT being charged – this is because the supply of land is usually exempt from VAT.

However, for larger landlords, such as landed estates, university colleges and the Church Commissioners, whose income arises mainly from rents, the making of significant exempt supplies restricts their ability to recover input VAT on repairs and on professional fees. These landlords may choose to make a formal VAT election known as an ‘option to tax’. The effect of the option is to convert their supplies of the land and buildings (except residential property) to a standard rated supply on which they will charge the usual 20% VAT. The landlord can then recover input VAT related to the standard rated supplies."

In brief the PLA have began in 2010 adding VAT to any River Works licence fee where there is at least one standard rated boat present. They charged VAT on the whole bill even if most of the boats are houseboats and so VAT exempt. UPDATE Nov 2010 The PLA have begun charging VAT only on the proportion of the bill that relates to standard rated boats! Nevertheless it is likely that you do not need to pay them any VAT on two grounds - the wording of your licence (is VAT mentioned?) and the wording of the VAT Act (is a riverworks licence the grant of a facility to moor or is it grant of a right over land?) contact us for info.

A standard rated boat is any boat smaller in volume than 15 gross tons that is capable of self propulsion or of being readily adapted for self propulsion. Note 'gross tons' is a cargo volume measure not a weight measure but as a rough guide 30-40 tonnes weight or a boat 15m by 4m may be 15 gross tons.

If the boat is not designed for recreation and is over 15 gross tons in volume then it can be zero rated for VAT. This applies to moorings fees in a 'Qualifying Port'.

Any boat designed or adapted for use solely as a place of permanent habitation, of any size, that is not capable of self propulsion or of being readily adapted for self propulsion is a 'houseboat' and is VAT exempt. We think a boat with the engine, gearbox, propeller, mast and steering mechanism removed meets this definition but it has not been tested. HMRC say "It is unlikely that a vessel such as a barge or a yacht would be regarded as a houseboat for the purposes of VAT because they are likely to lend themselves to being readily adapted."

'Exempt' and 'Zero rated' are not the same thing.

VAT goes up to 20% on 4th January 2011.