HM Revenue and Customs Brief 38/09
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Issued 8 July 2009
VAT - 'Dutch barges' and similar vessels designed for and used as permanent
residential accommodation by owners
Who needs to read this?
Businesses making supplies of:
- vessels to be used for permanent residential living by the owner
- certain goods and services to the owners of vessels used for permanent
residential living by the owner
This brief also withdraws Section 4 of Business Brief 35/04 VAT -
clarification of the VAT liability of ships supplied to customers who intend to
use them as residential accommodation.
'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
'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.
H M Revenue & Customs (HMRC) policy
In the light of the High Court decision in the case of Lt Cmdr Colin Stone
 EWHC 1249 (Ch), HMRC are changing their long-standing policy on the
liability of vessels used as residential accommodation, excluding houseboats,
for VAT purposes. This case concerned the VAT liability of the supply of 'Dutch
barges' acquired for the purpose of being used as a permanent residence.
The High Court decided that the supply of the vessel was entitled to
zero-rating under the terms of UK law, because it was designed to be lived in as
a permanent home and, therefore, not designed for use as recreation or pleasure.
HMRC consider that many of these and similar vessels, although designed for
use as a permanent residence, can also be designed for use as recreation or
pleasure and are perfectly capable of being so used. It was never the intention
that UK legislation should provide for the supply of such vessels to benefit
from zero-rating but, following Tribunal and Court decisions over time, HMRC
have found it increasingly difficult to apply a consistent and coherent policy
around the borderlines in this area.
HMRC do not rule out a wider review of policy and legislation in this area.
However, in the meantime, we have decided to treat Dutch barges and similar
vessels that are designed and supplied for use as the permanent residence of the
customer as qualifying ships and eligible for zero-rating. As vessels of less
than 15 gross tons can never be zero-rated regardless of their design, the
majority of narrow boats designed for permanent residential use will not meet
this requirement and their supply will continue to be standard-rated.
As a result of this policy change some supplies of goods and services to the
owners of such vessels may also be zero-rated by suppliers.
- repairs and maintenance of the vessel itself; this does not extend to the
domestic equipment and fittings on board
- modification or conversion of the vessel itself provided that it remains a
qualifying ship after modification or conversion; this does not extend to
domestic equipment and fittings
- parts and equipment ordinarily installed or incorporated in the
propulsion, navigation, communications or structure of a ship; this does not
extend to domestic equipment and fittings
Further details can be found in Notice 744C.
Evidence of intention
In keeping with normal rules, suppliers will have to hold evidence to satisfy
HMRC that the supply is entitled to zero-rating. This may be in the form of
contractual or other documentary evidence. HMRC would also advise suppliers to
obtain a declaration from their customers that the vessel is to be designed for
use as a permanent residence and intended for such use. We would suggest that
suppliers use the format set out for the Undertaking of Use in Notice 744C,
adapted as necessary where the supply is one of the vessel itself. Customers
should be aware that HMRC have powers to impose penalties where false
documentation is used to obtain a tax advantage.
Past supplies and claims
Customers who have been previously charged VAT on a supply that is now
covered by this policy must approach the person who made the supply to them to
obtain a refund of VAT. They should not contact HMRC as we have no legal powers
to refund tax direct to customers. Suppliers who wish to claim a refund of VAT
charged to customers on a supply covered by this policy must submit their claims
in accordance with the published rules and subject to the normal repayment,
unjust enrichment and capping criteria to HMRC.
For further information on houseboats please see Public Notice 701/20: VAT
Caravans and Houseboats.
For further information on qualifying ships please read Public Notice 744C:
VAT Ships, aircraft and associated services
For additional information on parts and equipment please read Information
Sheet 15/07 VAT: Supply of parts and equipment for qualifying ships and
Or contact our National Advice Service Helpline on Tel 0845 010 9000, or by
email, or by writing to:
HM Revenue & Customs
National Advice Service
Written Enquiries Section
About the Author
© Crown Copyright 2009.
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updated regularly and may be out of date at time of reading.
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Article Published/Sorted/Amended on Scopulus 2009-07-10 11:36:52 in Tax Articles