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VAT is zero rated on many barges. To be zero rayed, HMRC state that it has to be a qualifying ship and designed and used as a permanent residential accommodation by owners.
A ‘qualifying ship’ is zero-rated for VAT purposes, which means that it’s VAT-free when you buy it in the UK. And when you want to do some work on it, unlike a conventional house, supplies of most parts and equipment are also VAT-free, as are repairs, maintenance works, modifications and conversions. Vessels of less than 15 gross tons can never be zero-rated, so most narrow boats, even if they are used as a home, will be standard-rated.
HMRC issued a brief (38/09) dated 8th July 2009 concerning VAT on Dutch barges and similar vessels designed for and used as permanent residential accommodation by owners. VAT is now zero rated on these residential qualifying barges and also retrospective on previous builds, but can only be claimed back via the barge builder. HMRC state that:-
'Qualifying ships' - are zero-rated for VAT purposes. A 'qualifying ship' is defined as a ship which is not less than 15 gross tons and is neither designed nor adapted for use for recreation or pleasure. The law is set out in the Value Added Tax Act 1995, Schedule 8, Group 8, Item 1 and legal note A1(a).
'Houseboats' - are covered by a separate zero-rate. For VAT purposes, 'houseboats' are boats designed as living accommodation that do not have, and cannot be fitted with, a means of propulsion. If a boat can be fitted with a means of propulsion, it is not a 'houseboat'. The law is set out in the Value Added Tax Act 1995, Schedule 8, Group 9, Item 2.
An interesting article / blog regarding VAT on barges by Solicitor and tax specialist Ann L Humphrey and can be read here http://www.annlhumphrey.com/content/bon-voyage
For the latest on New Build VAT see the Barging.co.uk Message Board Forum
For info.... Up until December 2004 many barge builders supplied barges at zero rated VAT. This was deemed possible because they came under the 'qualifying ship' category, eg. 'as a ship which is over 15 gross tons and is neither designed nor adapted for use for recreation or pleasure'. However HM Customs issued a business brief in December 2004, clarifying the VAT liability (although the actual law did not change, just the clarification). From then on it appeared that the only way a new build barge could be zero rated was if it were 'deigned' for commercial use, with built in hold, however appeals were made, and won, and further clarifications made by HMRC. For latest updates see barge Message Board Forum