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Thread: Chartering

  1. #1
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    Default Chartering

    What are the pro's & con's of coding a boat & introducing it into a partnership which supplies your own Ltd company & some customers & chartering it to them for entertaining etc ? This is something that is going on anyway, but I am wondering if there is a more tax efficient way of doing it. I intend to keep this boat long term so the vat situation doesn't bother me regarding a sale.
    Last edited by rubberduck; 29-04-12 at 18:49.

  2. #2
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  3. #3
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    Big question - no simple answer. Chartering in general is not an economic proposition unless you can generate sufficient activity to cover the costs and hassle. The idea of doing a bit to offset the costs rarely works well. Many charter boats are specifically set up for the activity and professionally managed. Lot of them around, so difficult to break in unless you have the infrastructure to market the boat properly and perhaps have something unique to offer.

  4. #4
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    Default Is it for real?

    Quote Originally Posted by Tranona View Post
    Big question - no simple answer. Chartering in general is not an economic proposition unless you can generate sufficient activity to cover the costs and hassle. The idea of doing a bit to offset the costs rarely works well. Many charter boats are specifically set up for the activity and professionally managed. Lot of them around, so difficult to break in unless you have the infrastructure to market the boat properly and perhaps have something unique to offer.
    HMRC are sensitive to whether the boat is really in the charter business. If they sense it is just a way of getting your personal boating on the cheap by offsetting the costs into a business they get very unhappy. Ways of ensuring a legitimate approach are - using an independent professional charter management company, having a web site offering charter and particularly setting up a visible method where you pay your company a reasonable (but discounted) fee for your private use of the boat. Since you are posting this on the motor boat forum, as far as I know there is no way of getting insurance for chartering fast power boats bareboat in the UK so you would have to set up a skippered service.

    All of the above is based on my informal experience of chartering out a sail boat a few years ago and is not definitive
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  5. #5
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    Aug 2001
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    I used to run a few boats as day charter boats. Run as a sole trader not Ltd company. VAT paid boats as on smaller boats it wasnt worth the hassle of trying to keep ex VAT.

    When I first did it there were some large capital allowances you could use in the first year against income which made for easy cashflow.

    I also went through a major investigation from HMRC and even though everything was in order it wasnt a pleasant experience as it took up a lot of time. They really do want to see everything.

    Unless its a full time bona fida charter business I would prefer to keep things simple. Im sure if you were to have a coded boat and do a few charters where you recieved income then the income could be off set against running costs, check with your accountant though, this would still require filling out the sections on your tax return each year.

  6. #6

    Default

    I charter mine, also as sole trader. VAT is not an issue due to some specific provisions under French tax law that don't apply in the UK. In terms of income tax, I pro-rata the cap allowances and general running costs between private and charter use, and fully deduct the costs specific to chartering. Cap allowances are still quite generous, and create a tax loss, which can be netted off against income tax on other earnings, although of course there's a sting in the tail when you come to sell the boat, unless depreciation matches the cap allowances. You need a reasonable proportion of charter business for this to make sense though.

    This kind of arrangement definitely rings alarm bells at HMRC, and you should always count on an investigation (I have one ongoing currently), even though it is the correct accounting treatment, and in no way a form of tax avoidance.
    Last edited by Nick_H; 30-04-12 at 12:23.

  7. #7
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    I do just what you describe ie charter it to my firm for corporate days etc However I would suggest you talk to some local sea schools as they are often in need of boats for training.

    We charter ours to a local sea school who use it primarily for tuition for the Royal Marines. It's a very handy extra income and should prevent HMRC from suggesting that it is a tax ruse.
    Charter Blackfeather here
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  8. #8
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    Default

    Interesting, thanks for replies & pm's guys, gives me something to discuss with the accountant.

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