Structuring a Yacht for Commercial Purposes

CLIENT SCENARIO

  • A UK resident, non-domiciled client wishes to buy a new 65 metre (213ft) luxury motor yacht
  • The yacht would accommodate 14 passengers on board, as well as operate a professional crew of 19
  • The yacht would be used for commercial operations
  • The yacht would be made available in both the Mediterranean in the Summer months and the Caribbean in the winter months for chartering purposes
  • Expected delivery date approximately 12 months from initial enquiry

Our Approach

Luxury assets such as Superyachts are subject to ever-changing laws and regulations, and our specialist team at KHMA are highly knowledgeable in the management of such assets and take far reaching measures to ensure a smooth and seamless service is provided to clients and their other professional advisers at all times.

In this instance, the team at KHMA were recommended to the client by the client’s existing legal firm, who, had dealt with KHMA for a previous client. Our yacht specialist team worked hand in hand with the client’s tax and legal advisors to ensure that any potential remittance issues for the non-domiciled client were well managed, whilst working with our VAT advisors to structure an appropriate Isle of Man Company to take ownership of the yacht, whilst maximising any potential tax and VAT savings.

Considerations

1. Taxation of the yacht:

The beneficial tax regime afforded by the Isle of Man is arguably the most significant benefit. Like the Channel Islands, the Isle of Man has retained a 0-20% tax regime for companies with the standard rate of corporate tax being 0%, and no capital gains tax.

The Isle of Man, unlike the Channel Islands, is treated as part of the UK for VAT purposes. It is this unique combination that has primarily made the Isle of Man so attractive for yacht owners, who are also looking to import their yachts into the EU through the Isle of Man.

An Isle of Man VAT registered business can enjoy the following benefits:

  • Zero rate corporation tax
  • No capital gains taxes
  • No stamp duty (including on share transfers)
  • No inheritance tax or death duties
  • Currently part of the EU for VAT purposes
  • Independent of UK for direct tax purposes

2. Where to register the yacht:

The client was also seeking advice on where he should register his yacht. The decision on where to register your yacht is always driven by where you intend to operate. Selecting the right jurisdiction is of the upmost importance and with so many ship registers available, and competing service providers offering different solutions, the decision can often be difficult and confusing. It is therefore vital for clients entering the Superyacht industry to ensure they choose providers who have proven knowledge and skills in the management and structuring of valuable assets such as luxury yachts. Our team go to great lengths to ensure in the first instance the clients’ individual goals (in this instance how and where they will operate their yacht) is fully understood, before making any recommendations about a potential solution. After careful consideration, it was decided that an Isle of Man (red ensign) flag would be the most suitable.

Benefits of registering in the Isle of Man:

It was argued that the Isle of Man Ship Registry is not just a register for ships and yachts. It is a Centre of Excellence, where client focus is paramount that provides a high quality service with significant cost savings.

The  Isle of Man Ship Registry provides a high quality of service that is available 24/7 with fast response to queries, reasonable costs and no annual tonnage dues. It operates in a favourable taxation regime designed to encourage business and has the right to fly the “Red Ensign” with access to the support of the British consular services world-wide and British Royal Navy protection.

Client Solution:

The available expertise on offer provided the client with a solution that enabled the yacht to be structured in the most efficient and compliant way, whilst providing the freedom to operate the yacht in their chosen manner under an internationally respected quality flag of choice.

Why Choose KHT?

  • Clients at the centre of everything we do
  • Wealth of experience, understanding and technical knowledge
  • We nurture long term relations with clients and advisers
  • Collective strength of the wider Knox group of companies
James-Porter

Speak to our Expert

James Porter
Business Development Director