Are you refit ready? Andrew Wilson, Head of Aviation and Marine, looks at how to avoid costly mistakes with a yacht refit
After a busy summer season and the Mediterranean yachting season begins to wind down, you may be thinking about a refit. Maintenance and design are two aspects of a refit. While maintenance is a must, design enhancements aren’t. Should you incur extra expenses whilst the decking is up?
Only you can answer this. If the answer is “yes” – or even if it is “no” and you’re opting for a maintenance only refit – read on for tips about managing your costs and the process.
Engage professionals
Your technical manager will handle the work required and a good lawyer who has deep yacht industry knowledge and a reputation for strong advocacy is a must.
Experienced legal review of contracts is key to structuring a refit – and your chosen lawyer will have an intimate understanding of the specific refit contract provisions; the work agreed will be mirrored in the contract. This team may be representing you should a dispute arise or worse, arbitration or litigation, so choose wisely.
Plan your budget and manage it throughout the refit
After the budget is finalised, make sure the committed funds will be available to pay the yard, service providers, and suppliers throughout the project phases. Factor in all costs, including taxes.
Consider earmarking a contingency budget of 10% to 15% for unanticipated issues. Also, consider hedging your currency risk to reduce the impact of exchange rate fluctuations. Consult your financial advisor or bank for advice.
Tax and customs strategies
Refit work is taxable depending on the ownership structure. Within the EU, taxes can differ based on the specific country and locality. Whatever the circumstances, VAT may be applicable and needs careful analysis.
There are mechanisms to recover VAT or to not be charged VAT at all. The VAT position can be impacted by customs procedures and time restrictions. It’s best to consult with a tax advisor early and remember that your domicile status, as the ultimate owner, may affect taxation.
Regarding customs duties and import VAT, the vessel itself is one consideration but soft furnishings and goods might be sent to the yard, and these will also need to be cleared through customs. Budget for more cost in administration and potential duties.
Yards are experienced in handling goods and can potentially minimise customs import VAT and replace it with a small fee. Yards will typically try to remove as much Duty and VAT as possible using a local customs broker.
Yard due diligence
Perform due diligence to ensure you contract with a high-quality yard. For some yards, times are tough and supply chain issues can threaten their financial health and impact their service.
Go deep on understanding the yard’s track record, yacht experience, and ask for references.
Insurance – a critical component
Inform your insurer that your yacht is going into the yard for a refit, and check that your coverage is adequate. Also, ensure the yard’s insurance policy will cover your vessel for the entire time it’s in their possession. Both policies need to be reviewed. Finally, engage a marine insurance specialist to review both policies to ensure there are no coverage gaps or conflicts.
Independent project manager
It’s crucial to have an independent project manager. They’ll be on site at the yard to make sure the project runs within budget. You’ll want someone who can hold their own with the yard and negotiate effectively.
Have a plan for your crew
The downtime caused by a refit could be a trigger event for your best crew members to seek new employment. It’s best to put a plan in place if you want to retain them.
Alternatively, if you’d like to work with a new crew, this could be an opportunity to start afresh.
Consider including your experienced crew member(s) in the refit. They typically have extensive knowledge of the vessel and can be helpful in leading the process.
Communication
Effective communication is vital and can promote positive outcomes.
If you’re considering a refit, engage an excellent team, plan well, hold parties accountable, and communicate effectively. Then, enjoy your refitted yacht!
Yacht ownership – regardless of yacht type – is complex.
Having the right partners on hand who can support an owner with their structuring needs is key.
For more details
Tel: +44 1624 850500
or visit www.zedra.com
