It doesn’t matter if you can’t say it in the lingo in the UK. NETP…Non-Established Taxable Person. Anyway, this is their way of saying: “Foreigner, be our guest – you’re welcome to charter in the UK”.
You are a NETP if you are not normally resident in the UK VAT area (includes the Isle of Man), do not have an establishment and, in the case of a company, are not incorporated in the UK VAT area.
However, your lack of a physical presence is not a bar to charter. If as a NETP you charter out your yacht in the UK VAT area, you are liable to register and charge VAT on your charter. If you fail to register for VAT at the right time, you will incur a penalty.
For certain charter itineraries there is no liability to register for VAT at all. And, in other cases, you can apply for exemption from registration. This means process is critical – your obligations to VAT are determined within the prescribed registration process.
You can choose to register directly with HMRC (or IOMCE in the Isle of Man) or, more realistically, by appointing a VAT agent or representative.
Yacht owners and operators already chartering out their yachts in the EU will relate easily to the setup necessary for a NETP charter in the UK VAT area – the two systems are in fact similar in many respects. Unfortunately, while it was within the EU before 2021, there was some perception that chartering in the UK caused VAT problems.
It was a perception. It didn’t matter that there was never definite proof, or that most of the yacht owning entities chartering in the Med belonged directly or indirectly in the UK VAT area. The perception grew, partly fanned by anecdotes about the levels of due diligence that HMRC did before issuing a VAT number to an intending yachting business.
One unintended consequence of Brexit is that the fog surrounding NETP charter in the UK VAT area has cleared. Non-established taxable persons making or expecting to make charters of any value in the UK VAT are required to register for VAT.
The growing number of yacht owners who engage with it discover that the UK VAT registration system remains like that in EU countries. Somewhat different though is the expectation of the VAT exemption which could arise from the application to register.
Information in our blogs is very general in nature and should not be acted upon without first consulting with a tax advisor. Please feel free to contact Y & A Group, LP to schedule a complimentary consultation.