Explanatory note on VAT on houseboats and qualifying ships

Houseboats are exempt from VAT. However, a review by Her Majesty’s Revenue & Customs (HMRC) has determined that River Works Licences or Licences to Moor are not sufficient evidence to determine that they should be exempt.

Unless we can evidence a vessel is a houseboat, as defined by HMRC, then the PLA has to apply VAT on all future invoices.

Affected PLA licence holders were notified of this change by letter (March 2021).

What this means

The HMRC ruling is backdated for four years.

VAT will only be passed on to PLA licence holders from this year (2021/22), with a credit applied to the account of non-VAT registered licensees, to cover the first year’s additional charge.

We will pay the back-dated four years of VAT to HMRC.

Definitions

A houseboat is defined for the purposes of VAT as being a floating decked structure which:

• is designed, or adapted, for use solely as a place of permanent habitation.
• does not have the means of, and which is not capable of, being readily adapted for, self-propulsion.

We know that many houseboats registered with us don’t meet this definition.

More information is available on HMRC’s website.

“Qualifying ships”

A qualifying ship is zero rated for VAT, which means the VAT charge is zero.

We do not have any licences that specifically relate to “qualifying ships” in the category of people we have written to. These are legally-defined as any ship that has a gross tonnage of not less than 15 tons and is not designed, or adapted, for use for recreation or pleasure. They cannot be permanently moored, which is the case with licences used for residential uses.

“The intended use of a vessel does not affect qualifying ship status. The only factors to be considered are the gross tonnage, the design of the ship and any future adaptations”.

“Where a vessel is designed to be lived in as a permanent home by the owner, it may be treated as a qualifying ship, even though it might also be used for recreation or pleasure”.

“Motor cruisers, powerboats and yachts are designed or adapted for use for recreation or pleasure, so they do not qualify as ships, even if they’re 15 gross tons or over, or supplied for business use”.

-- Quote from HMRC Vat notice 744C.

If you think your residential vessel/houseboat is actually a “qualifying ship”, you need to check using the detailed guidance given in HMRC website.

What houseboat owners need to do

• Read the VAT notice; determine whether your vessel is a houseboat or not.
• If your vessel is a houseboat, sign the declaration and return it to us. We will check/verify the information and then issue a variation to your licence.
• If you wish to declare a qualifying ship, we will need to see evidence of the tonnage (merchant shipping registration or a marine surveyor letter) and ensure you can confirm that your vessel meets the other criteria to qualify.

Related Information:

• HMRC Guidance: Caravans and houseboats (VAT Notice 701/20)
• HMRC Guidance: Ships, trains, aircraft and associated services (VAT Notice 744C)