Brexit: Yacht Happens Next?
What impact could Brexit have on the UK’s superyacht community? From owner to shipyard, crewmember to broker, Benjamin Maltby of Ince & Co LLP outlines the legal and commercial transitions predicted over the next couple of years.
While the referendum has dominated the headlines in recent weeks, once the dust has settled one thing is certain: it’ll be business as usual in yachting for the next couple of years at least – albeit against a background of slight uncertainty. While the Treaty on European Union provides for what looks like a fast abandon-ship option, it qualifies this by setting out a laborious exit procedure. And making the necessary changes to domestic laws will also be time-consuming.
Much debate has turned on future trading relationships. A future UK’s relationship with the EU will likely require it to apply the principles of free movement of persons, goods, services and capital and other EU obligations.
Joining the European Economic Area as an associate state of the EU, or the European Free Trade Association (EFTA), or agreeing Swiss-style bilateral treaties, may achieve much the same effect. The clock would be turned back to before the UK’s accession to the EEC in 1973 – a time when the UK shipbuilding industry was a great deal more buoyant, making dozens of vessels each year of a similar size to some of today’s superyachts.
Conceivably, a lighter regulatory touch may give UK yards looking to export a competitive advantage – all other things being equal. But it’s doubtful we’re going to see the end of the Recreational Craft Directive, for example. Trading with the EU would mean doing so with all members – as a bloc. It’s unlikely that the UK would be able to enter into bilateral trading arrangements and not be subject to EU rules – thereby giving the UK an unfair competitive advantage.
For dealers and brokers looking to import vessels, depending on the result of negotiations, it’s possible that little would change. Should EFTA membership or bilateral treaties not be agreed, however, inevitable reciprocal import duties would certainly have a negative impact on our sector both in the UK and the EU.
Temporary Admissions – Potential Owner Benefits
There may be good news for UK yacht owners (who make up 11 per cent of global superyacht ownership according to Wealth-X and Camper & Nicholsons’ April 2016 report The State of Wealth, Luxury & Yachting). Depending on the final settlement reached, UK nationals may no longer be ‘established’ in the EU for VAT purposes, thereby becoming entitled to use their yachts
privately in the Mediterranean, under Temporary Admission, without becoming liable to pay the tax on their vessels. Owners will also be able to do so while flying the flag of the UK, Isle of Man or Gibraltar.
Renewing Temporary Admission for Spanish-based yachts may be complicated if Spanish calls for joint control of Gibraltar, in the wake of the referendum vote, gain traction.
UK crewmembers in Antibes and Palma have expressed alarm on social media as to their futures. While the annual migration of crew to Antibes and Palma at the start of the season in search of work may be curtailed, once working as bona fide seafarers it is to be hoped that their limited presence ashore should not place them in breach of local law. Members of the expatriate superyacht services community may have more to fear if they cannot meet any investment and/or qualification requirements.
There’s better news for UK-based exporters of superyacht goods and services, including yards, equipment manufacturers, yacht managers, underwriters and lawyers. A weaker pound will give these an immediate boost. In the longer term, their reputations for quality and value will continue to precede them.
The yacht and superyacht sector owes its existence to those for whom change represents opportunities more than threats. A time of legal and commercial transition awaits us.
Written by Benjamin Maltby with contributions from Andrew Charlier and Duncan Bateson, members of Ince & Co LLP’s dedicated international Yachts & Superyachts team, advising on all aspects of purchase, building, finance and ownership. www.incelaw.com/yachts.