The tough approach in enforcing VAT rules felt throughout the yachting world risks being counterproductive, according to a firm of tax advisers in the UK. This is because owners are considering registering companies that owned the yachts in other Member States that are more flexible such as Malta.

Buyers of expensive yachts face a crackdown by Revenue & Customs, which has threatened to sink “abusive” schemes designed to wipe out Value Added Tax bills.

The schemes, which exploit the differences in VAT rules between European Union countries, avoid tax by using a sham ownership structure to give the appearance that the yacht is chartered or leased, the Financial Times reported.

The move is being driven through by senior tax officials who are challenging two popular VAT planning ruses, involving cross-border leasing and “artificial” chartering arrangements.

The Financial Times added that officials intent on blocking the schemes are considering resorting to a new anti-avoidance weapon – resulting from a European Court judgment last year – that allows it to unravel transactions undertaken essentially to avoid VAT.