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Brexit and EU VAT status

The answer to this might be “who knows”, but in light of this thread on customs in Germany, I’m wondering about the impact of Brexit on the following two scenari for UK-based N-regs:

1/you’ve imported your plane via a third party EU country, say Denmark which used to be popular. Your Danish paperwork showing that import serve as an import in the UK today, i.e. those papers show you don’t need to pay VAT in the UK. After Brexit, moving a plane from Denmark to the UK would incur VAT, so how do you prove you’ve made the import to the UK before?

2/If you’ve solved (1) and your plane is imported in the UK, but you want to sell it in the EU, there will then be a VAT impact. So the market for your airplane has just been reduced to the UK. Right?

EGTF, LFTF

Post moved to what I think (?) is a very similar thread.

1) You could not have done Danish route after c. 2010. Also the Danish route must have given you a document: the Danish Certificate of Free Circulation for VAT. A lot of countries hated that certificate but under the rules they had to accept it… with some exceptions where general tax avoidance rules were applied e.g. Germany and Italy.

2) If your plane attracts VAT, it is like it being “non VAT paid”, anywhere. There have always been two markets for planes:

  • customers who can claim VAT back; these prefer non VAT paid planes, since these are ~20% cheaper
  • customers who cannot claim VAT back; these prefer VAT paid planes (basically any plane which at some point has passed through a non VAT registered individual or corporate body) but those planes are all 20% more expensive because some poor bugger lost the VAT on them and wants to get the money back

However I may not be understanding it right, because once you paid EU VAT you should not pay it again. Or maybe you do? No doubt it depends on how long it has been outside the EU. I recall a previous thread on this. If a UK based VAT-paid plane is sold to Jersey and sits there for a few years, when it comes back, it may atract VAT again. Movement logs are required…

OTOH the UK may do a deal with the EU. They probably should, because the same issue can arise with a car, etc.

Administrator
Shoreham EGKA, United Kingdom

Thanks – indeed, similar thread.

1) That doc (which I have) works inside the EU, so how will that work in UK ex-EU?

2)

once you paid EU VAT you should not pay it again

That’s what I want to avoid (or avoid having the eventual EU-based buyer of my plane needing a 20% discount)!

EGTF, LFTF

denopa wrote:

That’s what I want to avoid (or avoid having the eventual EU-based buyer of my plane needing a 20% discount)!

VAT is a tax. Whenever you import something across a customs border, you (as a private person) will have to pay VAT. It doesn’t matter if the VAT is already payed on the other side of the border. It’s utterly irrelevant. There may be lots of exemptions. For instance, we don’t pay VAT on any electric cars. No VAT on special items and so on. Also, there is typically a lower limit. If you import less than the limit, this can go VAT free. Tax free shops at airports are VAT free (real tax free shops, not the fake ones).

If you buy something in another country and take it back home (across a customs border), then you don’t have to pay VAT in the other country, but instead you pay VAT in your home country (if it’s over the limit). It doesn’t matter if the goods are brand new or used, but good luck trying to get back the VAT (in the other country) on used goods There may be exemptions here as well actually. Old stuff that are more of curiosity than actual usable items may be imported VAT free and so on (VAT is still payed a long time ago in the other country). Who knows what odd exemptions the UK will cook up? maybe SEP’s

ENVA ENOP ENMO, Norway

I have just flown to Montenegro (non EU) and back and didn’t have to pay EU VAT So clearly the picture is not simple. A search with a term like

VAT AND LIMIT

(uppercase AND) digs out several threads which probably contain the rules on how long the plane has to be out of the EU before you get hit for import VAT. I think it is several years. Some interesting reading around here.

However any plane (with the possible exception of planes made in the EU and which provably never left the EU for long periods) is liable to getting hit for import VAT, and this can happen anywhere, UK included. This is why nobody should buy a plane unless it comes with the Certificate of Free Circulation for VAT. Sure, there are opinions that a sales invoice is enough…

That doc (which I have) works inside the EU, so how will that work in UK ex-EU?

It should work as it does now. The UK is not going to suddenly go after the VAT just because it (the country) has left the EU. The UK does some crazy things but it would not do anything as crazy as this.

avoid having the eventual EU-based buyer of my plane needing a 20% discount

That may be the outcome.

Or not, depending on what deals are done with Brussels on VAT. Also see here.

Administrator
Shoreham EGKA, United Kingdom

Peter wrote:

They probably should, because the same issue can arise with a car

Back in the days before the UK joined the EU, if you took your car to France and if for example wrote the car off in an accident you would need to arrange to have the remains transported offshore and dumped at sea to avoid paying import duties, there was quite a business at the time doing this.

Maybe this will return and G-REG aircraft (if registered after the Brexit date?) would need to consider this, ditto Europeans visiting the UK?

Peter wrote:

I have just flown to Montenegro (non EU) and back and didn’t have to pay EU VAT

There is a VAT exemption on reimporting exported goods with cumulative conditions:

  1. only if they were not exempted of VAT in the first place because they were exported (duh)
  2. only import by same person that exported it (so if the plane leaves the EU even only for 1h, is sold while out of the EU, and reimported, VAT is due! There are exemptions for stuff like inheritance.)
  3. only if the reimport has a customs exemption, too (so, following a similar reasoning of the German court decision, if you land back at a non-customs aerodrome, you could not get the customs exemption, so not the VAT exemption)
  4. One of the following
    1. The goods are reimported in the same state than it was exported (no repairs, no betterment, while out of the EU; non-betterment maintenance may be fine, I don’t know.) Article 143.e
    2. The goods are reimported after having been repaired for free; I find that in the Luxembourg law (article 46) but not in the EU directive, so beware.

If there was a betterment after a temporary export, I’m fairly sure you pay the VAT on the betterment only (and shipping costs, if any). Article 88: VAT must be the same than if the betterment had been done in the EU. The exact words which I summarised as “betterment” are “repair, processing, adaptation, making up or re-working”.

denopa wrote:

1/you’ve imported your plane via a third party EU country, say Denmark which used to be popular. Your Danish paperwork showing that import serve as an import in the UK today, i.e. those papers show you don’t need to pay VAT in the UK. After Brexit, moving a plane from Denmark to the UK would incur VAT, so how do you prove you’ve made the import to the UK before?

The route log? The fact that the owner resides in the UK?

denopa wrote:

2/If you’ve solved (1) and your plane is imported in the UK, but you want to sell it in the EU, there will then be a VAT impact. So the market for your airplane has just been reduced to the UK. Right?

Unless you take a 20% price cut, yes.

Peter wrote:

However I may not be understanding it right, because once you paid EU VAT you should not pay it again.

As long as the two "you"s in your sentence are the same person…

ELLX

nobody should buy a plane unless it comes with the Certificate of Free Circulation for VAT

I disagree. I’ve never seen such a certificate and never been asked to produce one.

Firstly, the time limit for keeping VAT records in most EU countries is 6 years. If the airplane has been in the EU for longer, that’s all you need to show.

Secondly, the Istanbul Convention requires that means of transport (including light aircraft) must be granted temporary admission free of tax/duty by the EU and any other Contracting State. The European Commission website states that no formalities are required for such temporary admission in the EU.

As for the UK tax authorities, they are easily bamboozled – or simply so understaffed that they couldn’t care less – see attached FedEx entry for £42k of Enstrom helicopter parts imported without payment of VAT. Nobody gives a toss whether the aircraft is actually used by an airline and therefore eligible for such an exemption.

Entry_121_024507G_21_05_2019_pdf

Glenswinton, SW Scotland, United Kingdom

denopa wrote:

1/you’ve imported your plane via a third party EU country, say Denmark which used to be popular. Your Danish paperwork showing that import serve as an import in the UK today, i.e. those papers show you don’t need to pay VAT in the UK. After Brexit, moving a plane from Denmark to the UK would incur VAT, so how do you prove you’ve made the import to the UK before?

2/If you’ve solved (1) and your plane is imported in the UK, but you want to sell it in the EU, there will then be a VAT impact. So the market for your airplane has just been reduced to the UK. Right?

For 1/ there will be no resources on HMRC side to sort that or care, so don’t bother unless you plan that import in the next 5 years, for 2/ now that is clear UK not going under customs union, I expect that to be either enforced sooner or to be the last discussed topic (no one wants to open discussion about goods VAT unless looking for a fight ), but who knows?

In the other hand, for buyers, UK based aircrafts are getting more attractive and already at -30% discount from exchange rate, that may offset some VAT expected costs?

Last Edited by Ibra at 15 Oct 22:39
ESSEX, United Kingdom

Re more general VAT issues e.g. the certificate of free circulation, this was discussed in the main VAT thread.

In the UK there was an amnesty – again a search for

VAT AND amnesty digs out some info. But there is no general 5 or 6 year limit after which they cannot go after you for import VAT.

This thread refers to time limits also.

Administrator
Shoreham EGKA, United Kingdom
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