Paying Taxes If You Live on a Boat
Living “off-the-grid” as a live-aboard frees you from many of the tiresome responsibilities of modern living but are you still tied up by local taxation?
Taxing Grey AreaIf your boat is your main residence then the question of whether you are liable for council tax can be a confusing one; ambiguous laws mean that while some live-aboards have to cough up their taxes like everyone else, others seemingly get away scot free.
Or do they? Even if, as a live-aboard, you are not liable for direct taxation, you may still be making your contribution indirectly via alternative charges.
Mooring TaxationThe source of the confusion can be traced back to the Local Government Finance Act 1992. According to Section 3, council tax is levied on domestic property, and while a boat can be considered as a domestic dwelling, it cannot officially be classed as a “property”. Instead it is an asset or possession, regardless of whether an individual chooses to live in it or not.
Any tax liability occurs not with regard to the boat itself, but the mooring the vessel occupies. If planning permission for permanent residential use has been secured on a mooring then it can be levied for council tax, but who actually pays the tax depends on whether you have exclusive occupancy of the mooring or not. If the mooring is yours alone then by rights you should be footing the bill. Many live-aboards mistakenly believe – or want to believe – that by living on a boat they must be tax exempt and avoid raising the issue with their local council. Whether they are eventually taken to task for their oversight depends on the conscientiousness of their local authority, which can vary significantly in this matter.
Given that the tax liability relates to the mooring, the council tax you pay is levied on the value of the mooring rather than that of the boat. Most residential boat moorings are consequently in council tax band A, the lowest band. There are some instances in which a permanent boat mooring is liable for council tax levied on the value of the mooring together with the value of the boat, but never exclusively on the value of the boat. These usually apply to purpose-built houseboats or any boats that are moored with a “sufficient degree of permanence as to be enjoyed with the mooring”.
Non-Exclusive ExemptionIf the mooring has planning permission for residential use but is not occupied by one boat exclusively (such as at a marina where there are no allocated moorings), and boats can moor up wherever is available at that time, then the occupancy of the mooring is deemed “non-exclusive” and as such is not permanent enough to be liable for Council Tax. In these instances the operator usually covers any taxation liabilities that may arise.
This taxation loophole is exploited by some live-aboards that occupy permanent non-exclusive moorings who disingenuously claim in their mooring agreement that their berth can be used by other vessels whenever they are away, thereby legally transforming their mooring into one that is non-permanent and non-exclusive – and council tax exempt.
Indirect PaymentThe grey area of waterborne council tax liability has led to a popular misconception that live-aboards are all tax dodgers and therefore shouldn’t benefit from local authority services. Even if a live-aboard is not liable for paying council tax through their mooring they nevertheless still likely make a contribution – albeit indirectly – through their British Waterways (BW) licence and mooring fees.
For instance, BW pay the government a combined tariff for Council Tax and business rates and boat users contribute to this levy through their boat license fees and, if appropriate, mooring charges.
If you avoid paying Council Tax directly through occupying a non-exclusive residential mooring then the operator will probably be paying Council Tax as part of their business rates they pay to the authorities, and these costs will be reflected in the mooring fee you pay. The boat licence fee directly covers the use of water, sewage, rubbish disposal and recycling facilities provided by BW. Depending on the value of the mooring, there is also the possibility of paying either value added tax (VAT) or corporation tax (CT) as part of the mooring fee. Whether you are charged VAT or CT depends on whether you have an engine or not, respectively.
What this means is that if you are paying for a BW licence and renting a mooring upon which business rates or Council Tax are being levied then you could in fact be paying the local authority twice over.
So ultimately it would seem that rather than it being easy to dodge paying taxes as a live-aboard, the opposite is in fact true – it’s actually very hard to avoid paying.