Looking into purchasing an IFR capable light aircraft and noticed that the market in the EU is much much deeper than in the UK. But as one of the Brexit dividends, that for some reason wasn’t plastered all over a bus, we’re now due to pay a VAT on importing goods from the EU.
If I were to purchase an aircraft second hand from an individual in the EU, where the said aircraft is in free circulation, with me also being an individual, would this attract VAT at the border? I have read that using and keeping the aircraft in the EU for a few months would lead the aircraft to become used owned goods and be exempt from VAT. Is there any truth to this?
Does the aircraft being N registered make any difference to any of the above?
If I were to purchase an aircraft second hand from an individual in the EU, where the said aircraft is in free circulation, with me also being an individual, would this attract VAT at the border?
Yes.
I have read that using and keeping the aircraft in the EU for a few months would lead the aircraft to become used owned goods and be exempt from VAT. Is there any truth to this?
No.
Does the aircraft being N registered make any difference to any of the above?
No.
that for some reason wasn’t plastered all over a bus
Yup, but think of the millions saved now happily flowing to NHS. A paradise!
My impression, based on the ever more appearing and so much crappier as well as expensive G-regs (compared to EASA-regs) seen offered online recently, is that „Brexit“ (or lack of a fresh continental supply of free circulation airplanes) is already priced in, in the UK. Sucks.
You have to pay VAT on a plane anyway, and brexit doesn’t change that in itself. You pay UK retail VAT (buying at home) or you pay import VAT (buying from the US, from South Africa, from Australia, etc, or from post-brexit EU).
There was never a legal way, pre-brexit or later, to get a plane without paying the VAT. However, a VAT registered individual or corporate body could buy a plane from a similarly VAT registered seller and – only upon receipt of a VAT invoice – reclaim the VAT afterwards. And they can today do the same today with import VAT on a plane imported from the EU; and no need for the VAT invoice because UK Customs will kindly provide it 
There is a separate market for secondhand planes which are being sold by a non VAT registered individual or corporate body and which are being sold “VAT paid”, but this is an illusion (as far as saving you money goes) because somebody along the chain of previous owners had to pay the VAT and didn’t recover it, so the price is inflated by the ~20%.
What you do not want to do is if you are VAT registered and you import a “VAT paid” plane from the EU, because you are paying the ~20% inflated price, then you pay the 20% import VAT, but you can claim back only the latter.
This same debate can be had in the opposite direction: for UK planes imported into the EU. People say that post-brexit a UK plane costs more for a mainland buyer but I don’t get it – because “VAT paid” planes (which could be bought and sold without a VAT element) are already inflated by the VAT which somebody lost. Brexit does not change this but most people fall for the illusion.
So, “VAT paid” is an illusion if you think it is cheaper. The exception to this is if importing EU → UK and then you have to pay import VAT also. I don’t know if there are any exceptions to this.
“Free Circulation” is a different concept. It means that EU VAT (or UK VAT, post brexit) has been paid at some point in the past, so you can’t get busted for having a plane on which the VAT was never paid (lots and lots of those around and nobody wants to talk about it too much, not just because it was never paid but also because it probably was paid but no proof exists). AIUI. @lionel will know more.
I have read that using and keeping the aircraft in the EU for a few months would lead the aircraft to become used owned goods and be exempt from VAT. Is there any truth to this?
Not heard of this. It may be true because there are similar provisions for personal effects including cars. However, from vague memory of somebody doing this USA → UK, it is quite a bit longer than a few months. But I really don’t know; the old Danish zero-VAT route (ended 2010) involved the lawyer owning the plane for just 1 day.
Peter wrote:
Not heard of this. It may be true because there are similar provisions for personal effects including cars. However, from vague memory of somebody doing this USA → UK, it is quite a bit longer than a few months. But I really don’t know; the old Danish zero-VAT route (ended 2010) involved the lawyer owning the plane for just 1 day.
Have not heard of this either, one can import an aircraft free of VAT if one has owned it for 6 months AND one has been resident outside of the UK for at least 12 consecutive months (+ some other conditions):
https://www.gov.uk/guidance/transfer-of-residence-to-great-britain
Same applies for transfer of residence into the EU as the UK here has retained existing EU VAT and customs regulations.
The issue is that VAT has been paid on import to the EU by the individual owner. Since they’re an individual they, as far as I know, can’t reclaim VAT when selling it to me. But I’ve got to pay VAT again when importing it to the UK. Both individuals, not VAT registered in any way.
Peter wrote:
Not heard of this. It may be true because there are similar provisions for personal effects including cars. However, from vague memory of somebody doing this USA → UK, it is quite a bit longer than a few months. But I really don’t know; the old Danish zero-VAT route (ended 2010) involved the lawyer owning the plane for just 1 day.
Yeah exactly, it’s supposed to be for used goods that are your personal property and that you are not intending to resell or use commercially. But have tried to find out more on the UK gov website without much success (though much of it is thick with legal lingo so good luck to anybody!).
The issue is that VAT has been paid on import to the EU by the individual owner. Since they’re an individual they, as far as I know, can’t reclaim VAT when selling it to me.
The buyer only is potentially reclaiming VAT.
But I’ve got to pay VAT again when importing it to the UK.
Possibly. This and around there may be relevant.
Your case is more complicated apparently – the plane went UK → EU and now EU → UK. How long it was in the EU and when will be relevant.
This same debate can be had in the opposite direction: for UK planes imported into the EU. People say that post-brexit a UK plane costs more for a mainland buyer but I don’t get it – because “VAT paid” planes (which could be bought and sold without a VAT element) are already inflated by the VAT which somebody lost. Brexit does not change this but most people fall for the illusion. So, “VAT paid” is an illusion if you think it is cheaper. The exception to this is if importing EU → UK and then you have to pay import VAT also. I don’t know if there are any exceptions to this.
If you buy UK → EU, you lose “UK VAT paid” and you pay “EU VAT”?
The “double taxation extra” is not an “illusion” if it has to come from someone’s pocket? not sure who should pay that but let’s say it’s Mr Richman post 20% and everyone is happy
In the other hand, buying “UK paid VAT in UK” or “EU paid VAT in EU” with no export or taxation comes way cheaper as no tax is due…
Peter wrote:
Your case is more complicated apparently – the plane went UK → EU and now EU → UK. How long it was in the EU and when will be relevant.
No the plane has never been imported to or from the UK to my knowledge. It has always been outside.
You have to pay VAT on a plane anyway, and brexit doesn’t change that in itself.
The OP clearly inquired about purchasing a pre owned EU located aircraft from and a as a private individual. If UK were a still part of EU, no (import) VAT would have to be paid, thanks to the customs union. Brexit basically killed the EU<>UK market for planes for private buyers. No way I’d buy a UK plane and then another 20% EU import VAT. Same is true in the other direction. Pre Brexit I would have considered UK planes just as well as any other European ones.
To say „You have to pay VAT anyway“ is misleading.
Yes you are right. I had later added this
The exception to this is if importing EU → UK and then you have to pay import VAT also. I don’t know if there are any exceptions to this.
There were some exceptions but they are probably gone now.
A VAT registered business transaction is still the same as before. Actually all you need is a VAT registered seller and then you get a zero-VAT sales invoice. A high % of IFR tourers are company owned, and a fair % of those companies are VAT registered.
